Our Success Story Continues VALUE CREATION FROM PERFORMANCE AND INNOVATION

Transcription

1 ANNUAL REPORT 2008 Year Ended March 31, 2008 Our Success Story Continues VALUE CREATION FROM PERFORMANCE AND INNOVATION

2 By expanding and adding value to its service range, Nippon Express is accelerating its growth from No. 1 in Japan to the global top rank. Nippon Express began its existence as a transport company connecting rail freight terminals and customers on October 1, For seven decades, it has supported Japan s economic development through high-quality logistics services. During that time, it has grown into Japan s largest group of logistics enterprises, offering transport services across land, sea and air. In addition to high-quality shipping, Nippon Express offers many value-added services that have earned the trust of our customers. These include third-party logistics (3PL) to meet a broad range of logistics needs including warehouse services, security transport services to carry cash and valuables safely, and heavy haulage and construction, which is a set of services ranging from transportation to installation of plant equipment and more. Our business scope extends far beyond Japan. From our network of 381 bases in 37 countries, we are actively developing our international forwarding and intra-area logistics businesses. As a global logistics enterprise deriving nearly 30% of sales from overseas business, Nippon Express is determined to capture new logistics demand worldwide and achieve large-scale, sustainable growth. No. 1 in The Japanese Market, Market Leadership in Japan CONTENTS FINANCIAL HIGHLIGHTS 2 CSR & CORPORATE PHILOSOPHY 26 INTERVIEW WITH THE PRESIDENT 4 CORPORATE GOVERNANCE 27 SPECIAL TOPICS CRISIS MANAGEMENT, COMPLIANCE & 1: OUR GLOBAL BUSINESS 10 PERSONAL INFORMATION PROTECTION 28 2: 3PL BUSINESS 12 DIRECTORS, OFFICERS & 3: DOMESTIC BUSINESS CORPORATE AUDITORS 29 DIFFERENTIATION 14 ENVIRONMENTAL & 4: INTEGRATION OF THE PARCEL SOCIAL CONTRIBUTIONS 30 DELIVERY BUSINESS 16 FINANCIAL SECTION 33 REVIEW OF OPERATIONS GLOBAL NETWORK 56 THE AMERICAS 18 COMPANY INFORMATION 60 EUROPE 20 SHARE INFORMATION 61 ASIA & OCEANIA 22

3 Before s 1960s 1970s 1980s 1990s 2000s ESTABLISHMENT AND OVERSEAS EXPANSION 1872 Riku-un Moto Kaisha is founded 1875 Company name changes to Naikoku Tsu-un Kabushiki Kaisha 1928 Begins operations under the name of Kokusai Tsu-un Kabushiki Kaisha Shares at time of founding 1937 Nippon Express Company, Ltd., is established Transportation when horse-drawn carriages were used because of fuel shortages Nippon Express consolidates Japan's small transportation companies, and begins its modern-day operations Early head office in Nihonbashi-Muromachi 1950 Nippon Express goes public and is reestablished as a private company 1958 A representative office opens in New York The Transport History Archives (currently Museum of Logistics) is established 1962 Nippon Express U.S.A., Inc., is established 1963 Representative offi ce opens in Seoul 1966 Representative offi ces open in Dusseldorf, Amsterdam and Rome 1967 Representative offi ces open in Taipei and Sydney 1968 Representative offi ces open in Paris and Bangkok 1970 Representative offi ces open in Singapore, Honolulu and London 1973 Nippon Express (Singapore) Pte. Ltd., is established 1977 Nippon Express (Nederland) B.V. is established 1978 Nippon Express Hawaii, Inc., is established 1979 Nippon Express (H.K.) Co., Ltd. and Nippon Express do Brasil Ltda., are established 1981 Nippon Express (U.K.) Ltd., and Nippon Express (Deutschland) GmbH are established 1983 Nippon Express (Belgium) N.V./S.A. and Nippon Express Canada Ltd. are established 1984 Nippon Express Tours (Europe) Ltd. and Nippon Express (Malaysia) Sdn. Bhd. are established 1985 Nippon Express (Australia) Pty., Ltd., Nippon Express France, S.A., and Nippon Express Travel U.S.A., Inc. are established 1986 Nippon Express (Italia) S.R.L. is established 1987 Nippon Express (Schweiz) AG is established 1988 Nippon Express de Espana, S.A. is established 1989 Nippon Express (Thailand) Co., Ltd., is established 1990 Nippon Express (New Zealand) Ltd., is established 1992 More than 200 bases outside Japan 1994 Shanghai Express International Co., Ltd. and Nippon Express (Shenzhen) Co., Ltd., are established 1995 Nippon Express Philippines Corporation is established 1996 Representative offi ces open in Hanoi and Ho Chi Minh City The offi ce in Johannesburg reopens 1997 Nippon Express (Zhuhai) Co., Ltd., Chile S.A. and P.T. Nittsu Lemo Indonesia Logistik are established 1998 Representative offi ce opens in Budapest 1999 Number of overseas employees exceeds 8, Number of overseas employees exceeds 10, Nippon Express (St. Petersburg) LLC established Nippon Express safety symbol, created to mark the company s 70th anniversary th anniversary of the founding of Nippon Express Nippon Express (India) Private Limited, Nippon Express Russia LLC and Nippon Express (Middle East) L.L.C. are established Acquisition adds ocean cargo division to Nippon Express (Taiwan) Co., Ltd th anniversary of Nippon Express first venture into overseas markets NOTABLE ASSIGNMENTS IN OUR HISTORY 1951 Transports antiques for Ancient Art of Japan Exhibition for the fi rst time, begins art transport operation 1964 Performs services for the Olympic Games in Tokyo Transports the Venus de Milo A History of Sustained Growth and 1970 Performs services for the International Exposition in Osaka 1972 Performs services for the Winter Olympics in Sapporo 1982 Transports Moai statues from Easter Island 1985 Performs services for International Exposition in Tsukuba, Japan 1990 Performs services for Flower and Greenery Exposition 1991 Nippon Express moves Tokyo Metropolitan Government Offi ce 2000 Carries out moving work in accordance with the reorganization of government ministries and agencies 2002 Carried out transportation work related to the hosting of the FIFA World Cup soccer tournament 1974 Transports the Mona Lisa 1978 Performs services for transferring New Tokyo International Airport to Narita 1998 Transports the Statue of Liberty scale model from Paris Museum of Logistics opens 1999 Transports the Liberty Leading the People 2005 Performed services for The 2005 World Exposition Aichi, Japan 2006 Transported the giant mural The Myth of Tomorrow, painted by Taro Okamoto BUSINESS EVOLUTION AND ENVIRONMENTAL ACTIVITIES Dai-ichi Kongo Maru 1949 Nippon Express fully enters the marine transport business A moving operation using containers 1951 Begins experimental operation of Nittsu-style container transport 1955 Begins travel services and domestic air freight forwarding 1957 Start of international air freight combination 1964 Freighter Dai-ichi Ten-nichi Maru connecting Tokyo and Muroran starts operation Begins marine transport operations using three-ton containers 1965 Establishes Security Transport Business Division 1971 Marine transport route connecting Tokyo and Tomakomai, Hokkaido, is opened Begins operation using 10-foot, fi ve-ton containers 1977 The Simple Pelican Box service is launched 1981 The name Simple Pelican Box is changed to Pelican 1982 The Pelican service extended to overseas destinations 1983 Pelican services for golfers and skiers begin 1984 VAN system begins operation 1986 Chakubarai Pelican service (COD service) begins 1987 Daibiki Pelican service (another class of COD service) begins 1989 Cool Pelican service begins 1991 The corporate committee is established to address environmental issues Super Pelican service is launched The REWARDS inventory management system begins operation 1992 Electric vehicles are introduced 1993 Reusable moving materials are developed 1996 Full operation of integrated clerical work processing system begins 1997 Recyclable moving/packing materials are developed Global distribution information system N-SHATLE is developed Pro Konpo service is launched The Eco-Business Division is established 2000 The first Environmental report is issued Cool Pelican service (chilled transportation) is launched CSR report Number of low-pollution vehicles introduced exceeded 1, Ecology Konpo home removal product launched The Compliance Department is established 2004 New IT system commences operation 2005 New Pelican Delivery Time Frame Specification service begins 20th anniversary of the Nittsu Family Concert 2006 Eco-Recycle Express and Eco-Recycle Box sale launched Ecology Konpo service receives Eco Products Award, the Minister s Award from the Ministry of Land, Infrastructure and Transport

4 NIPPON EXPRESS GROUP BUSINESS SITES (As of March 31, 2008) 37Countries Subsidiaries and affiliates of the Nippon Express Group in Japan and overseas Overseas 68 TOTAL 360 Domestic Cities The Nippon Express Group comprises Nippon Express and 292 subsidiary companies (among these are 267 consolidated subsidiaries and 1 equity-method subsidiary) plus 67 affiliates (of which 21 are equity-method affiliates). 381 Offices and warehouses Steady Expansion Overseas 1 MARKET SHARES IN JAPAN (Market shares announced by JAFA, JR FREIGHT and MLIT as of March 31, 2008.) International air freight Domestic air freight Railway transport Warehouse business, encompassing 21 group companies % % % % Nippon Express is Asia s No. 1 air freight forwarder and No. 2 in the world. It is now expanding its business by carrying out not only shipments to and from Japan but also trilateral shipping, such as from points in China and Asia to destinations in Europe and Americas, taking advantage of a network spanning 37 countries. Nippon Express offers added-value products, such as BSP (special correspondence transport) and personal information courier services, as well as high speed logistics services, particularly for business-to-business freight. With the growing interest in implementing a modal shift a move to limit global warming by switching to rail and sea transport instead of trucks Nippon Express is using its comprehensive capacity for departure and arrival services to promote the shipping of large containers by rail. Demand for third-party logistics (3PL) services, in which a logistics business takes over every aspect of delivery, storage and sorting by destination, has grown steadily in recent years. Nippon Express is responding to this great demand by actively building conveniently located warehouses around large urban areas.

5 FINANCIAL HIGHLIGHTS Millions of yen Thousands of U.S. dollars* For the year: Revenues 1,901,433 1,866,267 1,793,925 $18,978,280 Revenues by geographic segment* 2 Distribution & transportation 1,597,284 1,580,546 1,522,325 15,942,554 Goods sales 291, , ,908 2,913,702 Other 12,225 6,640 4, ,025 Revenues by industry segment* 2 Japan 1,682,699 1,666,887 1,631,402 16,795,087 The Americas 48,009 45,126 38, ,182 Europe 69,146 59,422 49, ,155 Asia & Oceania 101,578 94,831 74,693 1,013,857 Operating income 48,502 50,325 43, ,100 Net income 36,439 33,208 18, ,701 At year-end: Total net assets* 3 520, , ,205 5,198,353 Total assets 1,297,406 1,360,694 1,315,599 12,949,462 Per share: Net income (Yen, U.S. dollars) Dividend *1 U.S. dollar amounts presented in financial statements are included solely for convenience. The rate of US$1.00 = prevailing on March 31, 2008, has been used for translation into U.S. dollar amounts. Amounts less than one thousand U.S. dollars are rounded off in thousands. *2 The above figures for revenues by industry segment and by geographic segment do not include internal revenues or money transfers between the segments. *3 The calculation of net assets is carried out by applying the Accounting Standards for Description of Net Assets in the Balance Sheet (Accounting Standards Board of Japan, Accounting Standards for Business Enterprises, No. 5 dated December 9, 2005) and the Application Guidelines for Accounting Standards and Others for Description of Net Assets in the Balance Sheet (Accounting Standards Board of Japan, Application Guideline for Accounting Standards for Business Enterprises, No. 8 dated December 9, 2005) from the year ended March 31, Revenues Operating income Net income ( million) 2,000,000 ( million) ( million) 60,000 40,000 1,500,000 30,000 40,000 1,000,000 20,000 20, ,000 10, Total net assets Total assets Net income per share ( million) ( million) ( ) 600,000 1,500, ,000 1,000, , ,

6 Revenues by industry segment (Consolidated) Goods sales 15.4% Other 0.6% TOTAL 1,901,433 ( million) Distribution & transportation 84.0% Revenues by geographic segment (Consolidated) The Americas 2.5% Europe 3.6% TOTAL 1,901,433 ( million) Asia & Oceania 5.4% 3 Japan 88.5% Revenues by operation (Non-consolidated) Other transportation 16.2% Heavy haulage & construction 3.9% Air freight forwarding 15.8% TOTAL 1,312,125 ( million) Railway utilization transportation 7.4% Motor transportation 40.1% Warehousing 5.7% Marine & harbor transportation 10.9%

7 4 Masanori Kawai President, Chief Executive Officer

8 INTERVIEW WITH THE PRESIDENT Dear shareholders, the Nippon Express Group is currently moving ahead with the Three-year Power Up Plan, which aims at expanding and strengthening the Group s business operations under the slogan Challenging New Horizons in Innovation with Our Customers. The year ended March 31, 2008 (fiscal 2008) was the second year of this plan. To build on the record levels in revenues and net income that we achieved in the previous fiscal year, we introduced a number of new initiatives on the sales side and implemented a range of policies to strengthen our management structure. As a result, in fiscal 2008, the Company once again achieved record levels in revenues and net income. Growing Stronger on All Fronts 5 Question 1 First, how do you view the business environment and the Company s business performance in fiscal 2008? Looking at the global economic environment, although fears of a slowdown in the U.S. economy grew due to the subprime loan crisis and there was stagnation in some sectors, capital investment remained strong in many regions overseas, particularly in the emerging economies. My impression is that the situation was generally healthy overall. In the field of logistics, in which the Company operates, demand for international freight continued to increase. However, there was a slump in exports by air of flat-screen televisions and other electrical products and electronic components from Japan to North America, to a large extent resulting from the slowdown in the U.S. economy. The slump was particularly pronounced in the fourth quarter, so I am concerned about how the market conditions will develop following the year under review. Meanwhile, the business environment remained harsh in the Japanese market, with a study by the Nippon Express Group s Nittsu Research Institute and Consulting, Inc. showing that overall transportation volumes have declined for eight consecutive years. In addition, costs increased due to a sharp rise in fuel expenses, and there was a temporary stagnation in construction-related demand due to the amendment of the Building Standard Law. Regarding our accounting, there was also an increase in depreciation as a result of a tax system revision. All in all, it was an extremely challenging year for the Company. In this environment, we pushed ahead with our medium-term business plan, the Three-year Power Up Plan, and in our overseas business operations we achieved results largely according to plan. Domestically, we continued to focus our efforts on the third-party logistics (3PL) business and security transport business, and were rewarded with growth in both areas. We also performed strongly in trade incidental to logistics. As a result, in fiscal 2008, despite the challenging market environment, we were able to achieve record levels in revenues and net income, with revenues of 1,901.4 billion (a year-on-year increase of 1.9%), operating income of 48.5 billion (a 3.6% decrease), ordinary income of 55.9 billion (a 2.6% decrease) and net income of 36.4 billion (a 9.7% increase).

9 INTERVIEW WITH THE PRESIDENT It should be noted that the decreases in operating income and ordinary income were due to a 3.4 billion increase in depreciation costs resulting from the revision of the tax system, and a 2.7 billion increase in costs brought by the sharp rise in fuel expenses. If these special costs are factored out, we achieved an increase in both operating income and ordinary income. Question 2 The year under review was the second year of the Three-year Power Up Plan. Please tell us about the Company s progress under this plan. 6 The Three-year Power Up Plan is our medium-term business plan, and is based on the theme of stepping up in size, building a strong Nippon Express Group, and expecting a great leap forward. We launched the plan in fiscal Our targets for fiscal 2009, the final year of the plan, are revenues of 2.0 trillion, operating income of 54.5 billion, ordinary income of 60.0 billion and net income of 35.3 billion. I believe that we are making good progress toward these targets. Our overseas business operations are a key area of focus. The Americas, Europe, Asia and Oceania all performed strongly and the ratio of overseas business revenues to total consolidated revenues rose 0.2 percentage points from the previous year to 28.4%. Overseas, while the forwarding business has become central, we also saw strong growth in intra-regional logistics in each region, and we are building a more robust business structure that does not depend only on forwarding. Looking at Asia, we opened a large-scale logistics center for automobile parts in southern China, and strengthened our delivery system for all of China. In this market, the demand for delivery of automobile parts is increasing every year, so I believe this business will be a major strength for the Company going forward. We have also set up large new distribution bases in Chicago and Los Angeles in the United States, and in the Czech Republic and Poland in Europe, and are preparing for the expansion of intra-regional logistics. Furthermore, we have steadily built up a presence in emerging economies. In India, we quickly built a business foundation through our acquisition of a local logistics company in April In Russia, we strengthened our business structure by establishing Nippon Express (Russia), and in the Middle East, we made our first moves into the growth market of the United Arab Emirates with the establishment of Nippon Express (Middle East). Regarding our 3PL business, over the course of the year we increased our overall warehouse facility floor area in Japan by 100,000m 2. As 3PL provides comprehensive logistics services, distribution bases are absolutely essential as a starting point. Therefore, over the last two years, we have concentrated our investment into warehouses. We have completed construction of a number of warehouses and put them into operation, resulting in growth in revenues. In the past few years, an increasing number of our customers have expressed a desire to shift to concentrated management that consolidates dispersed warehouses into one location. For this reason, I believe that our continued investment in warehouses will lead to steady expansion of the 3PL business. In Japan, we have been focusing on businesses that enable us to differentiate ourselves from competitors. Our popular services include our CSD (cash safety delivery) security transport service for which we have acquired a business model patent, and our Ecology Konpo service, which is helping to reduce the environmental impact of the moving service segment. The heavy haulage and construction business and railway transport business, both of which are areas of strength for us, are also expanding strongly. Question 3 In the parcel delivery business, Nippon Express has announced business integration with Japan Post. What does this integration entail? In October 2007, we reached a basic agreement with Japan Post regarding the integration of our parcel delivery businesses, and on April 25, 2008 we officially concluded a basic agreement on integration. On June 2, 2008, we established a new company called JP Express Co., Ltd., which will play a central role in advancing the various procedures required to complete the integration. We plan to study matters such as equity capital and the delivery network in detail, conclude a contract between the shareholders of the two companies by the end of August, and launch the business in April 2009.

10 The parcel delivery business has the same character as the process industry in that the more cargo there is, the more efficient it becomes. Combining our Pelican Express service with Japan Post Service s Yu-Pack nearly doubles the size of the business, so there is no doubt that we can achieve greater efficiency than in the past. However, there will be no gains if the number of staff and facilities also doubles. Most of the employees involved in Nippon Express parcel delivery business will be transferred to the new company, where they will be joined by some staff from Japan Post Service. Basically, we will seek to generate synergy effects by using the information systems, large-scale terminal bases and other assets of Nippon Express together with the Japan Post Group s extensive nationwide collection and delivery network. We are now preparing for the full-scale launch of a competitive, high-quality parcel delivery business in April Question 4 What are your forecasts for the year ending March 31, 2009? Our forecasts for the year ending March 31, 2009, which we have already announced, are revenues of 1,945.0 billion (a year-on-year increase of 2.3%), operating income of 52.0 billion (a 7.2% increase), ordinary income of 58.0 billion (a 3.6% increase) and net income of 32.3 billion (a 11.4% decrease). These figures fall slightly short of the targets in the medium-term business plan. However, if we factor out the impact of changes to the business environment that were unforeseen at the time of the plan s establishment, then in fact they are very close to the plan s targets. I believe that the integration of the parcel delivery business will have no direct impact on our results for the year ending March 31, Looking at the forecast for each business and starting with the overseas businesses, although U.S. imports have slumped since the beginning of 2008, intra-regional logistics are performing well. Moreover, exports from the United States are expected to increase due to the depreciation of the dollar. In Europe, growth is highly likely to continue, particularly in Eastern Europe and Russia, and our business operations in the United Kingdom, which struggled in the first half of fiscal 2008, recovered in the second half of the year. We expect to see continued expansion in Asia as well, mainly in emerging economies, and in the fourth quarter we plan to change Nippon Express (China) from an equity-method affiliate to a consolidated subsidiary. Areas of concern are the cost increases caused by the sharp rise in fuel expenses and the many areas of uncertainty regarding the economic trends and consumption trends in the Japanese domestic economy. However, we will continue our efforts to improve our business performance through the 3PL business and products that differentiate us from competitors. 7 Question 5 Please tell us about the medium- to long-term prospects after the next fiscal year? In the medium to long term, I intend to build a powerful management structure that can reliably generate profits even as competition intensifies, particularly in the domestic business. Having spun off the B to C and C to C parcel delivery businesses to the new company, JP Express, we will in the future restructure our domestic business to focus on B to B. I intend to further streamline the parcel delivery business and strengthen its management structure through the process of this reorganization. Meanwhile, the market in which we can expect high growth is the overseas market. We are currently focusing our energies on intra-regional logistics, an area with near-limitless potential for expansion. The Company is generating revenues of approximately 1.0 trillion through its transportation operations in Japan alone, but we can continue to grow if we utilize our logistics expertise to expand our business in the United States and China, countries with many times the land area and population of Japan. When we do this, the business must be operated by local people for local customers. One of the major challenges we face in striving to become a truly global company

11 INTERVIEW WITH THE PRESIDENT is human resources. However, we will overcome this problem by building each national and regional base of Nippon Express into a major logistics company, and connect our worldwide logistics services. This is my vision of the kind of company the Nippon Express Group will be in the future. Question 6 The June 2008 General Shareholders Meeting approved the introduction of a counterplan against acquisition. What are the reasons for the introduction of this plan? 8 We will not necessarily reject an acquisition if it increases the corporate value of the Nippon Express Group and therefore improves the true value for our shareholders. However, as we believe that a certain amount of time is needed to sufficiently examine the details of a bid and reach a conclusion, we introduced a prior warning-type counterplan against acquisition. Currently, the Company is moving ahead with a variety of reforms to realize sustainable growth and increase shareholder value. For example, we are integrating our parcel delivery business with the Japan Post Service. We think that the common interests of shareholders would be harmed if these major changes, which are already under way, were to be hindered by a bidder with another objective. Under the counterplan, if a bidder attempts to acquire more than 20% of the Company s shares, the Company will request submission of the required information, after which an independent committee Prior warning-type, independent committee-type comprised of members from defense measure outside the Company judges Bidder the content of the information, and the Board of Directors Intention statement, required information Yes No passes a resolution on the Review period by the Board Non-compliance procedure matter. Furthermore, having members (60 days or 90 days) Non-compliance period considered the time that will Judge, form opinions and pursue alternatives by the Board members be needed until our current Review by independent committee reform initiatives produce results, we have stipulated a Recommendation NOT to apply Recommendation to apply period of three years. the counterplan by the committee the counterplan by the committee Follow the opinions Follow the opinions NOT to apply the counterplan (Resolution by the Board meeting) Apply the counterplan (Resolution by the Board meeting) Question 7 Please tell us about your policy for returning profits to shareholders and investors. Dividend development Consolidated net income Non-consolidated net income Dividend payout ratio (Consolidated) Dividend payout ratio (Non-consolidated) ( billion) (%) October 2007 was the 70th anniversary of the founding of Nippon Express. To commemorate this milestone and thank our shareholders for their support, we increased both the mid-term dividend and the year-end dividend for fiscal 2008 by 1 per share from the normal 4 per share, resulting in a dividend of 10 per share for the full year. Going forward, our basic policy will be to pay 10 as a normal dividend annually, and continue to strengthen our financial situation while also rewarding our shareholders for their support. The logistics business is not the kind of business that produces huge profits quickly. However, it is essential to society and will generate profits reliably if managed soundly. We are currently continuing our initiatives to aggressively expand our business both domestically and overseas, and we will use the extra profits to increase returns to shareholders. We wish to assure our shareholders and investors that we are a corporate group that will realize stable and sustainable growth, and look forward to their continuing support in the future. (Interviewed in June 2008) Masanori Kawai President, Chief Executive Officer 0 06/3 07/3 08/3 09/3 (Forecast) 0

12 SPECIAL TOPICS Going Further Every Minute of Every Day 9 Special Topic 1 OUR GLOBAL BUSINESS 10 Special Topic 2 3PL BUSINESS 12 Special Topic 3 DOMESTIC BUSINESS DIFFERENTIATION 14 Special Topic 4 INTEGRATION OF THE PARCEL DELIVERY BUSINESS 16

13 Special Topic 1 OUR GLOBAL BUSINESS 2006 ranking by the International Air Transport Association (IATA) Nippon Express was listed 2nd among air forwarders worldwide and 1st among air forwarders in the Asia-Pacific region in * The numbers in the circles show Nippon Express ranking in each country. Circle sizes denote the amount of freight handling charges paid to airlines. NETHERLANDS GERMANY BELGIUM U.S.A. MEXICO U.K. SPAIN FRANCE THAILAND SINGAPORE PHILIPPINES INDONESIA HONG KONG BRAZIL MALAYSIA TAPA certification acquired by: Nippon Express U.S.A. Inc.: New York Air Cargo Branch, Chicago Air Cargo Branch, Atlanta Branch, San Francisco Air and Ocean Cargo Branches, Boston Branch / Nippon Express (U.K.) Ltd.: Head Office (London) / Nippon Express de Espana, S.A.: Barcelona Branch / Nippon Express France, S.A.: Charles de Gaulle Airport Cargo Zone Warehouse / Nippon Express (Italia) S.R.L.: Head Office (Milan) / Nippon Express (Deutschland) GMBH: Frankfurt Branch / Nippon Express (Singapore) Pte. Ltd.: Head Office / Nippon Express (Philippines) Corporation: Manila Air Cargo Branch / Nippon Express (Malaysia) Sdn, Bhd.: KLIA Air Cargo Office, Penang Branch / P.T. Nippon Express Indonesia: Logistics Center / NEX Global Logistics Korea Co., Ltd.: Shihwa Warehouse / Nippon Express Co., Ltd.: Narita International Airport, Kansai International Airport C-TPAT acquired by: Nippon Express U.S.A. Inc. AEO (Authorized Economic Operator) certification acquired by: Nippon Express Co., Ltd., Nippon Express (Nederland) B.V. 10 GLOBALIZATION Revenues related to freight to and from Japan (Non-consolidated), and overseas revenues and its ratio to consolidated total revenues Revenues from overseas businesses To and from Japan Ratio of overseas revenues to consolidated total revenues ( billion) (%) Starting with the opening of a New York representative office in 1958, Nippon Express Co., Ltd. has continued to develop its business outside Japan, expanding in Europe during the 1970s and Asia since the 1980s. Today, with 381 bases in 210 cities in 37 countries (as of the end of March 2008), we rank as one of the world s most prominent global logistics enterprises. Our global business during the year ended March 31, 2008 accounted for 28.4% of our consolidated revenues (the total of nonconsolidated overseas-related revenues and overseas segment-specific sales for the Americas, Europe and Asia & Oceania) As the pace of globalization in the world economy becomes increasingly rapid, Nippon Express is taking advantage of its comprehensive overseas network to enhance its competitiveness and actively expand into newly industrializing /3 06/3 07/3 08/3 5 0 nations to further expand its global business, which is a crucial growth strategy. In our forwarding business, which is the heart of our global business, Nippon Express has forged alliances with other strong enterprises to

14 Expansion of intra-regional logistics business Cross-border shipping JIT delivery Air Country A vendor Sea Production Country B vendor Land LOGISTICS CENTER Distribution Country C vendor Intra-area milk run Vendor A Vendor B Vendor C Major logistics centers opened The Americas Europe Asia & Oceania Chicago Los Angeles Pilsen (CZECH REPUBLIC) Torun (POLAND) Moscow (RUSSIA) Singapore Guangzhou Hanoi Jan Nov Jan Nov Jan Dec Mar Dec ,400m 2 8,230m 2 16,000m 2 15,700m 2 24,000m 2 27,600m 2 16,600m 2 10,000m 2 11 rapidly and effectively step up competitiveness. As a result, in September 2007 we established CNJ World Logistics Co., Ltd., a partnership with China Shipping, one of the leading Chinese marine transport lines. This has enabled us to offer fares competitive enough to win global bids and secure a stable volume of shipping space. To boost our air freight business, in April 2008 we joined forces with All Nippon Airways Co., Ltd. (ANA) and Kintetsu World Express Inc. to form All Express Corporation (ALLEX), which began doing business in July. As the client demands placed on Asian supply chains have become more advanced in recent years, the new company has begun business in the sale of express products from Japan to Hong Kong and Shanghai. However, this is only a start. The company will expand its service area once ANA starts using Okinawa s Naha Airport as a hub in the autumn of On top of strengthening international forwarding, Nippon Express has worked to expand intra-regional logistics outside Japan in recent years. For example, in April 2007 we began regular operation of a shuttle truck service between Chicago, U.S.A. and Toronto, Canada, followed in May 2008 by a similar connection between Laredo (Texas), U.S.A. and Monterrey, Mexico. In Asia, regular combined freight round-trip truck delivery services connecting the north, east and south of China commenced in September 2007, while April 2008 saw the start of truck freight services between Hanoi, Vietnam and Bangkok, Thailand. In addition, we have actively worked to acquire authorizations that will further expand our business. As a result, in April 2008 Nippon Express (Nederland) B.V. became the first Japanese enterprise to become an Authorized Economic Operator (AEO), giving us favorable tariff treatment. Prior to this, in January 2008, we gained the equivalent of AEO status in Japan. Finally, we have been working towards certification under the standards of the Transported Asset Protection Association (TAPA), which evaluates logistics facility security and safety. In August 2007, Nippon Express (Singapore) Pte. Ltd. won the 18th TAPA certification for the Nippon Express Group.

15 Special Topic 2 3PL BUSINESS 12 LOGISTICS Revenues relating to warehousing business (Non-consolidated) and investment in facilities (In preparation for the expansion of the 3PL business) Warehousing Safe storage (additional business) Investment in facilities ( billion) As corporate customers, for instance in the manufacturing and sales industries, focus on their core businesses to promote efficiency, and as supply chain management grows more advanced and sophisticated, more companies are finding a need for third-party logistics (3PL) so they can hand their shipping operations over to an outside provider. A high-quality 3PL service, however, requires an operator that offers the entire range of services, including procurement logistics, inter-factory logistics, sales logistics (inventory management and delivery control) and reverse logistics (transporting industrial waste and returned or repaired goods). For Nippon Express, the 3PL business is a field in which we can prove our strengths. Due to the growing demand for concentrated logistics bases seen in recent years, making large warehouses available is also 0 05/3 06/3 07/3 08/3 becoming a key part of our 3PL business. Nippon Express identified this demand early on, which is why we have been building large-

16 Suggesting and developing commercial distribution and logistics systems Third-party logistics (3PL) Managing and operating commercial distribution and logistics operations Optimizing commercial distribution and logistics within the Nippon Express Group Major facility investments Place Type Space (m 2 ) Completion date Tokyo Kanazawa Osaka Trunk room Warehouse for business Warehouse for business 22,089 19,156 48,226 Apr May 2007 Jun Suggesting and developing customized information and operating systems that meet customers needs Knowledge-based soft services Nippon Express Group personnel managing and operating facilities and equipment in Japan and overseas, financial base, information systems Operation of commercial distribution Placement and acceptance of orders Sourcing Deputy of import and export Stock management Sales Material-based hard services Logistics operations Packing Warehouse management Forwarding Transport Just-in-time supply Tokyo Yokohama Nagoya Kyoto Tokyo (sublease) Tokyo (sublease) Warehouse for business Research facility Commercial warehouse Commercial warehouse Warehouse for business Truck terminal 16,199 10,860 25,973 16,292 56,710 24,000 Jun Jul Nov Apr Dec Jul Osaka Sustainable Architecture Award for Hokko Logistics Center Completed in June 2007, the Hokko Logistics Center of the West Osaka Branch was selected for a special prize as part of the inaugural Osaka Sustainable Architecture Awards. These awards were established under an ordinance of the Osaka Prefectural Government concerning measures to combat global warming, and aim to raise public awareness about environmental issues in general. Although the Hokko Logistics Center is a multi-level warehouse, it has no freight elevators and is designed to save energy through the use of natural lighting and ventilation. The award was given in recognition of these features. scale, well-equipped bases in recent years, particularly near cities where demand is high. In the year ended March 31, 2008, we completed large logistics centers all over Japan, including Ishikawa (Kanazawa/Senkoji No. 2), Tokyo (Kitasuna), Osaka (Hokko), Nagano, Hokkaido (Sapporo No. 2) and Aichi (Aisai). During this year, commercially available warehouse floor space in Japan increased by about 100,000 m 2, a gain of approximately 4%. Logistics bases are flourishing and as Nippon Express ascertains demand in the future, we plan to continue proactive investment in large warehouses. For Nippon Express, the 3PL business is an important part of our strategy for sustained growth, and the area has been steadily fruitful for us. For that reason, we are not limiting this business to Japan. Providing a 3PL service is a critical part of our global business, and we are now actively rolling out large logistics bases outside Japan. We have expanded our logistics bases in Central and Eastern Europe with the startup of a site in Pilsen, Czech Republic in May 2007 and in Torun, Poland the following October. We have also opened two core logistics bases for international and domestic shipments of automobile production components in South China, with the new Guangzhou Multi-Logistics Center and Huadu Satellite Logistics Center opening in January In the U.S., another large logistics base was built adjacent to Chicago s O Hare International Airport in February All together, in one year the warehouse space owned by our overseas subsidiaries increased by about 190,000 m 2. Nippon Express is making its 3PL business more competitive in ways other than expanding logistics facilities. We are also combining the commercial distribution management functions of our subsidiary Nittsu Shoji Co., Ltd. with the financial functions of Nippon Express Capital Co., Ltd., which was established in October 2006 as a financial subsidiary.

17 Special Topic 3 DOMESTIC BUSINESS DIFFERENTIATION 14 DIFFERENTIATION Sales expansion of differentiated services Railway Moving Security transport Heavy haulage and construction ( billion) /3 06/3 07/3 08/3 As it moves from an era of growth to an age of maturity, the logistics industry in Japan faces a more competitive environment. Nippon Express is working to set itself apart from the competition and following its strategy for sustained growth by focusing on its four areas of strength: railway transport, heavy haulage and construction, security transport and moving services. Railway transport is an area in which we have long held the No. 1 market share. Compared to trucks used mainly for domestic logistics, railway transport emits only one-sixth the CO2 and consumes one-fourth the energy. These environmental advantages have renewed interest in railway transport as customers become more aware of the need to head off global warming and other environmental problems. Railway transport does not work, however, unless it is skillfully combined with truck transport to connect cargo collection points and shippers with freight stations. To expand the volume of rail cargo handled, we are actively

18 Expanding the service range with financial services Share of differentiated services in Japan Distribution Performance information, Stock information NIPPON EXPRESS Logistics functions Order placement plan, Logistics operational instructions Distribution Railway Share (%) Rank Source JR Freight (Year ended March 31, 2008) Vendors Order placement plan, Order placement NITTSU SHOJI Commercial distribution management functions Order placement plan, Order placement Buyers Moving Market announcement Loans Order placement plan Loans NIPPON EXPRESS CAPITAL Financial functions Loans Cash transport Market announcement 15 leveraging our nationwide logistics network and our general strength in all modes of shipping land, sea and air. Similarly, we are developing products to meet specific customer needs, such as the TOYOTA LONG PASS EXPRESS, a special freight car that has run between Nagoya and Morioka to ship production components for Toyota Motor Corporation since November In October 2007, we expanded this service to two trips per day. International services combining rail and ships to connect Japan with China and South Korea have also proven popular. These include the Sea & Rail Service using Shanghai Super Express Co., Ltd. (SSE) between Hakata and Shanghai, and the Rail-Sea- Rail Service (South Korea), an international multimodal transportation service. Our heavy haulage and construction business provides one-stop service ranging from transportation to installation of heavy goods for large facilities like power stations and petrochemical plants, as well as large production equipment. The 2005 establishment of the heavy haulage and construction division has created a stronger organization in this area, leading to steady profitability. In the security transport business, we have set up devices to collect cash deposits from sales and food service businesses and others who handle large amounts of cash. Our CSD (cash safety delivery) service uses secure vehicles to visit these devices at regular times to collect funds and deliver change. This business is growing steadily and winning an increasing number of contracts for transporting cash and other valuables between the offices of financial institutions, collecting and distributing funds to large sales outlets and stocking ATMs with cash. In the moving services business, the Ecology Konpo service, which uses reusable packaging materials to reduce waste, is now available and being marketed nationwide. As environmental awareness rises, customers are making wider use of this service. Our goal is to expand sales further with a greater range of services. These include our Full Pack service, in which we do everything from packing and unpacking to putting furniture and appliances in place and cleaning up, and other services, like Half Pack, Self Pack and Tanshin Pack, thereby enabling customers to choose according to their budget and needs.

19 Special Topic 4 INTEGRATION OF THE PARCEL DELIVERY BUSINESS Mr. Masanori Kawai President, Nippon Express Co., Ltd. Mr. Yoshifumi Nishikawa President, Japan Post Holdings Co., Ltd. 16 PARTNERSHIP Diagram of transition of assets for small-package delivery business Terminals (About 70 locations) To be utilized by new company Leased to new company Separation into new company Not utilized by new company Sell (Return) Facilitate for other usage (Office to lease, residence etc.) Use for distribution Distribution centers (About 710 locations) Nippon Express parcel delivery service, Pelican Express, stands to become more competitive as the scale of its business grows. To take advantage of this scale benefit, we have made structural reform of our parcel delivery business a key business strategy in recent years. After considering our approach from many angles, we decided to merge our parcel delivery business with that of another major enterprise. On October 5, 2007, Nippon Express reached a basic agreement to merge Pelican Express with the Yu-Pack service of Japan Post Service Co., Ltd., part of the Japan Post Group, to form a new parcel delivery company. In accordance with the basic agreement, we established the equally owned joint venture JP Express Co., Ltd. on June 2, Upon concluding a shareholders agreement and formulating a new business plan for the new enterprise by August 31, 2008, we intend to launch full-scale parcel delivery services as a combined company from April 2009.

20 Integration of small-package delivery business with Japan Post Nippon Express Co., Ltd. Japan Post Group Investing 50% (At the beginning) Investing 50% (At the beginning) JP Express Co., Ltd. (Launched June 2, 2008, paid-in capital of 300 million) New company engages exclusively in the small-package delivery business. Japan Post will have majority shareholding after consolidation of the small-package delivery business. 17 Nippon Express began preparing for this integration of parcel delivery services with the November 2007 launch of its Small Package Business Strategy Headquarters, which is managing the transfer of personnel and facilities to the new company as well as the funds to be invested in it. Details are still under consideration, but we expect to transfer or dispatch up to 5,000 personnel, equivalent to our entire parcel delivery workforce, to the new company and use Nippon Express bases as collection and delivery terminals. The new company will make use of Nippon Express expertise for the IT systems used to manage cargo data and perform invoicing and collection processes, and for cargo transport trunk line and terminal operating methods. Also, because of the uneven geographic distribution of the business (70% of parcel deliveries are within 10% of Japan s area), the new company will use both parent companies assets to build a suitable collection and delivery network in regions with a high concentration of businesses, while using Japan Post Group s existing network in areas with a lower concentration. This will ensure an operating system with a high level of service quality and efficiency. Anticipating the integration of these parcel delivery services, we are also initiating efforts to reorganize Arrow Express, our combined freight truck service for cargo exceeding Pelican Express size and weight limits. While establishing the details of the new joint venture, we will create a stronger and more efficient Arrow Express that uses its business-to-business focus for outstanding competitiveness.

21 REVIEW OF OPERATIONS Business base expansion in fi scal 2008 U.S.A. Anchorage Atlanta Austin Boston Charlotte Chicago Cincinnati Cleveland Columbus Dallas Denver Detroit El Paso Honolulu Houston Indianapolis Laredo Lexington Los Angeles McAllen Memphis Miami Milwaukee Minneapolis Nashville New York (& New Jersey) Newport News Omaha Philadelphia Phoenix Pittsburgh Portland Raleigh Rochester Salt Lake City San Antonio San Diego San Francisco San Juan (Puerto Rico) Savannah Seattle St. Louis Troy Washington, D.C. MEXICO Aguascalientes Guadalajara Manzanillo Mexico City Monterrey Tijuana CHILE Santiago CANADA Calgary Fort Erie Montreal Toronto Vancouver Windsor Cambridge BRAZIL Campinas Manaus Rio de Janeiro Santos Sao Paulo 18 The Americas The financial concerns triggered by the subprime loan crisis in the United States are having a growing impact on the U.S. economy as a whole, as demonstrated by the country s economic growth rate falling 0.7 points to 2.2% in The high price of oil and grain is creating an economic drag, and a weak dollar has led to a lower volume of imports. Making up for this is the rising flow of exports, which has helped Nippon Express to enjoy growing profits in the United States as a whole. We are also handling much more cargo in Mexico, where production is strong. The end result is that for the term, revenues in the Americas were up 5.4% to billion and operating income rose 10.5% to 3.66 billion. During the current fiscal year, ending March 31, 2009, Nippon Express aims to expand its business by positioning itself to offer one-stop logistics services, stepping up intra-regional shipping capacity with a view to mergers and acquisitions, and by concentrating investment in emerging markets. Revenues by geographic segment (Consolidated) The Americas Europe Asia & Oceania Japan (Right scale) ( billion) ( billion) /3 06/3 07/ /

22 Regular Chicago Toronto shuttle truck service begins The Chicago Air Cargo Branch of Nippon Express U.S.A. Inc. and Nippon Express Canada began a regular shuttle truck service between Chicago and Toronto in April The Toronto route is the eighth line in the Chicago Branch s Midwest Time Advantage (MTA) service, which ships cargo arriving at O Hare International Airport for next-day delivery by truck to cities in the U.S. Midwest. After a steep rise in shipments of electronic products and automobile components from Japan to Toronto in recent years, the inadequate capacity of direct flights to that city has started to become apparent. To make up the gap, under the new shuttle truck service, Nippon Express Canada performs import customs clearance procedures 24 hours a day at the U.S.- Canadian border to ensure that our service is just as convenient for customers as a direct flight. The Toronto route is currently running three times a week, as opposed to the daily operation of other MTA routes, but the service will expand when there is enough demand. Our truck transport network covers North America from bases in Los Angeles, Chicago and New York, and by combining air and sea forwarding with land truck transport, we offer optimal logistics services for our customers needs. Opening of new central base adjacent to O Hare International Airport in Chicago The U.S. Midwest is starting to re-emerge as a hub for the automobile industry, including component manufacturers. Chicago s O Hare International Airport is a key gateway for air cargo to this industry. For Nippon Express U.S.A., O Hare Airport is of crucial importance, in part because it is the starting point for the MTA regular shuttle truck service to Midwest cities and Toronto, Canada. For that reason, the company opened a major base next to the airport in February Because the logistics business there is expected to grow further overall, for instance through distribution center operations including U.S. domestic shipping and marine cargo freight, the new base was built to a large scale, with 35% more area under roof than earlier facilities. The site was additionally designed to conform to TAPA Class A, the highest level of the global security standard for cargo facilities. 19 Opening of Monterrey Office of Nippon Express USA de Tijuana S.A. de C.V. Situated in northern Mexico near the U.S. border, Monterrey is Mexico s third largest industrial city, and as such has attracted numerous Japanese automobile-related companies and other manufacturers. This has led to a tremendous expansion in the volume of cargo handled in the area. In 2006, Nippon Express U.S.A. founded Nippon Express USA de Tijuana S.A. de C.V. to cover Tijuana, Mexico, and registered that company with the Services IMMEX Program* in Principal operations involve the import of raw materials and parts/components from Japan, Asia and other regions, the storage of finished and semi-finished goods, and distribution processing. The local business has now opened an office in Monterrey, registered it with the Services IMMEX Program, and utilized this program to develop its own door-to-door bonded transport system from Laredo, Texas on the U.S. border to Monterrey via a twice-weekly shuttle truck service. The transport flow of goods bound for Monterrey, which used to stop on the U.S. side of the border, has thus been improved and the lead time substantially reduced. The Monterrey Office has its own warehouse capable of handling long-term storage under the Services IMMEX Program. Equipped with REWARDS (Nippon Express s proprietary global warehouse management information system), this warehouse will provide customers with Vendor Managed Inventory (VMI), Just-in-Time (JIT) delivery and other high-quality logistics services. * Services IMMEX Program: A program that provides transport and warehouse storage services for raw materials and parts/ components imported to Mexico on a duty-free basis for the production of goods for subsequent export..

23 REVIEW OF OPERATIONS Business base expansion in fi scal 2008 U.K. Derby (East Midland) Glasgow Leicester London Manchester Newcastle Swindon IRELAND Cork Dublin FINLAND Helsinki BELGIUM Antwerp Brussels NETHERLANDS Amsterdam Rotterdam Venray GERMANY Cologne Dusseldorf Frankfurt Hamburg Hannover Munich Nuremberg Stuttgart FRANCE Lyon Mulhouse Paris ITALY Florence Milan Rome Turin HUNGARY Budapest SPAIN Barcelona Bilbao Madrid Malaga PORTUGAL Lisbon Oporto AUSTRIA Vienna SWITZERLAND Geneva Zurich CZECH REPUBLIC Prague Pilsen POLAND Wroclaw Torun Warszawa RUSSIA Moscow St. Petersburg TURKEY Istanbul SOUTH AFRICA Johannesburg LUXEMBOURG Luxembourg UNITED ARAB EMIRATES Dubai 20 Europe Economic growth in the euro zone rose 2.7% in 2007, eclipsing the U.S. growth rate for the first time in six years. The U.S. economic slowdown started to impact Europe, however, and in the second half of the year in particular, exports to North America tapered off while high oil and grain prices dampened personal consumption, making the environment more challenging in many countries. Business grew briskly in the emerging markets of Central and Eastern Europe and Russia, however, leading overall revenues to rise 16.7% year on year to billion. Despite this, operating income declined 10.3% from the previous year to 3.08 billion due to the high price of fuel, a strong euro and a temporary rise in costs incurred from the start-up of a warehouse in the United Kingdom. While the environment is expected to worsen in the period ending March 31, 2009, Nippon Express is actively taking on intra-regional logistics and striving to secure profits by capturing export cargo to the newly industrializing economies of Asia. Revenues by geographic segment (Consolidated) The Americas Europe Asia & Oceania Japan (Right scale) ( billion) ( billion) /3 06/3 07/ /

24 New bases set up in the Czech Republic, Poland and other locations in Central and Eastern Europe The Czech Republic and Poland, which joined the EU in May 2004, have seen massive investments in the automotive and electronics-related industries in recent years. This has sparked a surge in logistics demand, including cargo bound for Western Europe. Responding to the changing environment, Nippon Express (Deutschland) GmbH has been actively preparing bases in Central and Eastern Europe, including the Pilsen Logistics Center in Bor, Czech Republic, which opened in May The facility functions as a center for relaying electronic devices and other products from Japan to European destinations. Moreover, with its proximity to Frankfurt am Main International Airport, one of Europe s major gateways, we expect it to find use as a hub for the flow of goods into Central and Eastern Europe. In October of the same year, Nippon Express (Deutschland) also started operations at the Torun Logistics Center in Torun, Poland. The center aims to offer JIT logistics services to support manufacturing of products such as flat-panel televisions, especially for Japanese manufacturers. Nippon Express Russia LLC and Moscow Branch established, large warehouse under construction Seeing the business potential in Russia, Nippon Express opened a representative office in Moscow in 2005 to gather information and study the market. In 2006, we commenced business operations in this market with the launch of Nippon Express (St. Petersburg) LLC. The scope of that company s business in automotive-related shipping through the port of St. Petersburg has grown steadily, and in July 2007 we expanded our operating organization in Russia on the back of further growth in the country s economy. With the recently completed reorganization of Nippon Express (St. Petersburg), the company assumed the new name of Nippon Express Russia LLC, clarifying its position as our local corporation with responsibility for the Russian market. At the same time, Nippon Express Russia opened a Moscow Branch to serve as its base and reinforce its operational structure in the region. As it is capable of handling a wide range of businesses, including 3PL, air and sea forwarding and overseas moving services, the newly opened Moscow Branch plays a vital role in our expansion in Russia. The Russian unit is also opening a large warehouse in the Moscow suburbs close to Sheremetyevo International Airport. The facility will commence operations in January Nippon Express (Middle East) LLC established in Dubai, UAE The Emirate of Dubai, part of the United Arab Emirates (UAE), is looking ahead to the day when oil resources will become depleted, and has made an effort in recent years to build a service industry. To prepare its logistics infrastructure in particular, construction has begun on a large airport in Dubai. This is just one of the developments that are likely to turn Dubai into a major logistics transfer point for not only the Middle East but also Asia, the CIS countries, East Africa and the European continent. To take advantage of that environment, we established Nippon Express (Middle East) LLC in the Emirate of Dubai in February While we have had a representative office in the region since 2005, the establishment of the new company will enable us to provide high-quality transport and customer service to meet the logistics needs of Japanese, European and North American enterprises and offer comprehensive logistics service across land, sea and air.

25 REVIEW OF OPERATIONS Business base expansion in fi scal 2008 INDIA Bangalore New Delhi Chennai Mumbai Kolkata Pune Cochin Hyderabad Trivandrum PHILIPPINES Angeles Biñan Cabuyao Cebu Lapu-Lapu Lipa Makati Malvar Manila Parañaque Rosario Subic Pasig THAILAND Ayutthaya Bangkok Chiang Mai Chon Buri Pranchin Buri Rayong Songkhla Leam Chabang SINGAPORE Singapore VIETNAM Hanoi Ho Chi Minh City Haiphon INDONESIA Bali Bandung Batam Jakarta Surabaya Merak MALAYSIA Ipoh Johor Bahru Kuala Lumpur Kuching Malacca Penang Asia & Oceania CHINA Haerbin Changchun Shenyang Dalian Beijing Tianjin Yantai Qingdao Chanshu Zhangjiagang Nantong Nanjing Shanghai Suzhou Wuxi Jiaxing Hangzhou Ningbo Fuzhou Xiamen Huizhou Dongguan Guangzhou Shenzhen Zhongshan Jiangmen Hong Kong Zhuhai Xian Xiangfan Wuhan Changsha Chendu Chongqing Kunming Wulumuqi TAIWAN Hsinchu Kaohsiung Taichung Tainan Taipei Taoyuan Keelung KOREA Inchon Masan Pusan Seoul Shiheung AUSTRALIA Sydney Melbourne NEW ZEALAND Auckland 22 Economic growth rates surpassed 5% throughout Asia in fiscal 2008, coming to 11.4% for China, 5.5% for the NIEs* and 6.1% for the ASEAN-4 (Indonesia, Philippines, Malaysia, Thailand). Chinese exports leveled off due to the slowdown in the U.S. economy, but expectations for the Beijing Olympics and other events minimized any slowdown in China. The NIEs boasted strong exports to Europe and newly emerging economies, while the ASEAN-4 countries experienced growing domestic demand as prices on primary products rose worldwide. The high-margin air cargo area declined, but in the Asia & Oceania region revenues rose 5.8% over the previous year to billion and operating income jumped 12.6% to 5.09 billion for the term. In the current fiscal year, ending March 31, 2009, we aim to step up our efforts in the growing field of intra-regional logistics and expand our business lines, in part by responding to the shift of production to parts of Asia other than China. * Newly Industrialized Economies (South Korea, Taiwan, Hong Kong and Singapore) Revenues by geographic segment (Consolidated) The Americas Europe Asia & Oceania Japan (Right scale) ( billion) ( billion) /3 06/3 07/3 08/

26 Start of Mekong Land Bridge Express ground shipping service between Vietnam and Thailand With the development of a ground shipping route between Hanoi, Vietnam and Bangkok, Thailand, in April 2008, Nippon Express launched its new Mekong Land Bridge Express Service. Until now, transport between these two cities has principally taken place by air or by ship, with door-to-door sea transport service taking 14 days. Our new service ships goods between Hanoi and Bangkok in three days using the convenient East West Corridor between Da Nang, Vietnam and Mawlamyaing, Myanmar, which was made possible by the completion of the Second Mekong Bridge. To meet the demand for large-volume transport, we are offering a service using containers of the same specifications as marine cargo containers, and plan to begin a consolidated shipping service in summer 2008 for smaller cargo loads. Under the project name SS7000, Nippon Express has been working to connect the 7000 kilometers of road transport routes between Shanghai and Singapore. The Company already operates services on two segments: the Star Night Express between South China and Hanoi and the Oriental Land Bridge Express between Singapore and Bangkok. With the addition of the Mekong Land Bridge Express, the SS7000 route, which crosses the borders of six nations, is now complete. Construction of large logistics bases in Guangzhou, China In January 2008, Nippon Express (H.K.) Co., Ltd. opened two logistics bases in Guangzhou, South China for automobile production components: the Guangzhou Multi-Logistics Center (Yonghe District) and Huadu Satellite Logistics Center (Huadu District). Since starting automobile production component shipping services within China in 2004, Nippon Express has worked to expand its network there, and we now have 101 bases in 36 cities. Automobile production is steadily growing in China and, along with it, the volume of cargo shipped, but in the future we also anticipate growing exports to other areas and intraregional transport to production bases in Southeast Asia. The two new bases in Guangzhou are ready for the higher volume and sophistication of this logistics demand. Both centers are spacious, with 16,600 m 2 of floor space at the Guangzhou center and 6,300 m 2 at Huadu. Both come with truck and marine container docks and can handle domestic and international logistics. In the next fiscal year, Nippon Express (H.K.) will also complete a 10,000 m 2 scale warehouse in the Nansha district of Guangzhou, an important automobile industry cluster. These additions will enhance service quality by increasing reliability, cutting lead times and reducing inventory. 23 Merger of local companies creates Nippon Express (India) Pte., Ltd. In April 2007, we established Nippon Express (India) Pte., Ltd. after an M&A process in which we acquired 51% of the outstanding shares of the Indian air and marine cargo agent J I Logistics Private Limited (JIPL). This has helped us to rapidly establish our position in India, one of the so-called BRICs and a country that has seen rapid economic growth over the last decade. Since 2000, Nippon Express has set up representative offices in two Indian cities, New Delhi and Bangalore, and engaged in air and ocean cargo operations through our local agent. As Japanese automotive-related businesses have continued to enter this market, cargo volumes have risen quickly. The outlook for continued growth led us to acquire JIPL. Through this acquisition of a local enterprise, Nippon Express is now able to manage customs clearance operations for this market on its own, and our workforce of 300 employees stationed at bases in 10 Indian cities makes us the largest Japanese logistics enterprise in India.

27 REVIEW OF OPERATIONS Joint venture with China s leading marine transport enterprise In September 2007, Nippon Express joined forces with China Shipping (Group) Company, a major Chinese shipping firm, to establish CNJ World Logistics Co., Ltd. and thereby offer improved marine transport services in China, an increasingly important production base and consumer market. China Shipping is a key government-owned company managed directly by the Chinese government and boasts China s largest (and the world s sixth largest) fleet of oceangoing container ships. The new company is a joint venture equally owned by Nippon Express and China Shipping Japan Co., Ltd., a wholly owned subsidiary of China Shipping. The newly created CNJ World Logistics aims to expand its cargo business by leveraging the combination of the Nippon Express Group s global network and comprehensive land, sea and air transportation modes and China Shipping s marine cargo capacity. The firm will develop new customers and original business models for Japan China transport and trilateral trade. 24 Asia & Oceania Expansion of ULD service for enhanced shipping quality in China Certain Nippon Express facilities located close to airports offer a ULD Intact Service, in which Nippon Express staff bundle cargo intended for air freight onto pallets and containers (Unit Load Devices, or ULDs) and then unload the goods at another Nippon Express facility at the destination. Customers are increasingly taking advantage of this service for safe and reliable air transport of cargo and shorter delivery times. Air transport of delicate goods like semiconductors and electronic devices has increased in recent years. We are responding to this need with ULD handling systems in bonded warehouses at the Narita, Kansai and Chubu international airports. While already providing ULD services for several destinations (Hong Kong and four cities in mainland China), we anticipated growing demand as the Olympics drew near and in February 2008 began offering these services for the destinations of Beijing and Tianjin, thereby enhancing our capacity. Air service starts from Haneda to China Nippon Express began a new service in December 2007 to further boost the speed of air freight to China. The Kai-Soku! Hongqiao service uses a newly opened regular charter route between Haneda Airport and Shanghai Hongqiao Airport. With this service, cargo ready to go by evening in Tokyo is delivered to Shanghai the next day. This can save 20 hours from the ordinary route connecting Narita Airport and Shanghai Pudong International Airport. Before the launch of this service, we already offered an air cargo service between Tokyo and Shanghai in the form of Cho-Soku! Shanghai, which uses late-night flights connecting the Haneda and Kansai airports with Shanghai Pudong. With Kai-Soku! Hongqiao in place as our second fastest service, Nippon Express continues to enhance its product lineup, giving customers a choice in terms of time and costs. Construction of bonded warehouse in Hanoi, Vietnam Nippon Express (Vietnam) Co., Ltd. is building a bonded warehouse in the Minh Quang Industrial Zone in suburban Hanoi. The expected completion date is December In addition to offering a skilled labor force, Vietnam is also building international credibility by joining the World Trade Organization. Japanese industry continues to pour into the area, and today some 250 electric and precision device manufacturers have set up bases in Hanoi, the nation s financial center. Along with the increase in foreign-owned enterprises comes rising demand for warehouse space, and Nippon Express new bonded warehouse intends to meet that need. Moreover, since Hanoi is on the route of our SS7000 ground shipping service connecting Shanghai and Singapore, the new warehouse will play a pivotal role as a relay point.

28 C S R Doing More for Society and for Our World 25 CSR & CORPORATE PHILOSOPHY CORPORATE GOVERNANCE CRISIS MANAGEMENT, COMPLIANCE & PERSONAL INFORMATION PROTECTION DIRECTORS, OFFICERS & CORPORATE AUDITORS ENVIRONMENTAL & SOCIAL CONTRIBUTIONS

29 CSR & CORPORATE PHILOSOPHY CSR management Nippon Express possesses infrastructure for economic activity on a global scale. We recognize the important social responsibilities inherent to our role as a global logistics provider, and continue to expand our corporate social responsibility (CSR) activities. The reinforcement of our CSR activities is a key theme under our medium-term business plan for the period from fiscal 2007 to fiscal 2009, the Threeyear Power Up Plan. We continually strive to strengthen public confidence in the Nippon Express Group through policies targeted toward three key goals: Consistent compliance with all regulatory requirements Effective risk and safety management The application of environmental management principles. The commemorative program for our 70th anniversary in October 2007 included a number of initiatives to strengthen and enhance our CSR activities and ensure that all of our activities are permeated by CSR principles. These include: The adoption of a new corporate philosophy Continuing implementation of social contribution activities, especially in the area of environmental protection The installation of a monument inscribed with the words Pledge to Safety. Corporate philosophy In 1958, Nippon Express adopted Our Principles as a philosophical framework for all employees. Since then, these principles have been used as guidelines for employee behavior in all areas of our business activities. As part of activities to commemorate the 70th anniversary of the founding of Nippon Express, we formulated a new corporate philosophy. This combines the spirit of Our Principles with our vision for the future of Nippon Express. The new philosophy reflects a review of our values and our 26 approach to social contribution. Nippon Express Group Corporate Philosophy Our Mission Be a Driving Force for Social Development Our Challenge Create New Ideas and Value that Expand the Field of Logistics Our Pride Inspire Trust Every Step of the Way Since our founding, the Nippon Express Group has employed our logistical strengths to connect people, businesses and regions throughout the world. In so doing, we have continuously supported social development. While our mission never changes, we continuously advance to meet the world s changing needs. Making no compromise in safety and maintaining a deep focus on environmental issues, we continuously strive to deliver innovative solutions at the next frontier of logistics. We will forever take pride in our ability to inspire trust and answer the call of society. Every move we make is aimed at advancing society and bringing an enriched life to future generations.

30 CORPORATE GOVERNANCE Corporate governance Basic stance on corporate governance Nippon Express recognizes the importance of consistent compliance, transparent management and the improvement and reinforcement of corporate governance. Our basic policies call for timely management decision-making and transparent accountability, and one of our top management priorities is to develop systems and implement measures to achieve these goals. Corporate Organization Nippon Express has adopted a Company with Board of Auditors structure. In addition to the Board of Directors and Board of Auditors, we have also established a Board of Executive Officers with the aim of speeding up decision-making and business operations. The Board of Directors consists of 15 members (as of June 7, 2008). Normally it meets once a month, but special meetings can be convened as required. The tasks of the Board of Directors are to make important management decisions and supervise business operations. To provide clear management accountability for each business year, directors serve one-year terms. The Board of Auditors consists of four corporate auditors, including three external corporate auditors (as of June 7, 2008). Normally it meets every three months, but special meetings are convened when necessary. The corporate auditors attend important meetings and present fair and objective opinions on management in general or specific matters. They also audit the performance of directors duties by examining the legality of decisions and assessing internal control systems. The audit activities of the corporate auditors also include perusal of important documents, on-site inspections at key business sites, and inspections of subsidiaries. Their findings are reported to the Board of Corporate Auditors and the Board of Directors. Audits also cover the performance of executive organizations. The Board of Executive Officers consists of 26 members, including 14 executive officers who are also serving as directors (as of June 7, 2008). Normally it meets once a month, but special meetings can be convened if necessary. The tasks of the Board of Executive Officers are to disseminate the decisions of the Board of Directors and issue directives based on those decisions, to present reports on business operations, and to discuss important matters. Like directors, executive officers serve one-year terms. Strengthening internal control systems compliance with the J-SOX Law In May 2006, the Board of Directors of Nippon Express adopted and established a basic policy for the development of internal control systems in order to comply with Japan s new Corporation Law. The Financial Instruments and Exchange Law, which is known as the J-SOX Law, also stipulates requirements concerning internal control systems. In August 2006, Nippon Express launched a project to prepare for the full enforcement of the new law in March Work under this project includes the assessment of its internal control systems relating to financial reporting, and the development of audit mechanisms. In March 2008, Nippon Express achieved certification under ISO/IEC 27001:2005, which is the international standard for information security management systems (ISMS), and under JIS Q 27001:2006, which is the Japanese ISMS standard. The reliability of the Company s information management systems has been thoroughly assessed by independent organizations. 27 Corporate governance organizational chart Appointment and Removal General Shareholders Meeting Appointment and Removal Appointment and Removal Accounting Auditor Cooperation Board of Auditors Audit Board of Directors Report Appointment Audit of Accounts Report President Audit Report Corporate Attorney Compliance Committee Board of Executive Officers Crisis Management Committee Audit Division Audit Corporate Affairs Audit Enforcement Division (Headquarters divisions, Headquarters departments, regional administration (domestic/overseas), each business division, each branch office, each group company)

31 CRISIS MANAGEMENT, COMPLIANCE & PERSONAL INFORMATION PROTECTION 28 Crisis Management Structure Effective logistics is essential to the normal functioning of society. As a company involved in that field of business, Nippon Express is continually developing and strengthening its crisis management systems to minimize the disruption that would result from various contingencies, such as major natural disasters or incidents. In January 2000, we formulated the Crisis Management Code as the basic framework for our systems in this area. Organizational preparations include the establishment of the Risk Management Committee in our head office. In October 2001, we formulated the Nippon Express Group Disaster Response Regulations, which stipulate specific actions in the event of a disaster. A disaster management system site has been established on our intranet, and systems have been established to ensure proper reporting between head office and branches and among branches, in accordance with the Disaster Reporting Procedures. Since ordinary telephone lines may become unusable after a disaster, we have also provided satellite telephones in the relevant head office departments and in key branches. Compliance Management In June 2003, we strengthened our compliance systems through the establishment of the Compliance Division. In October of the same year, we completed our basic compliance structure with the formulation of the Compliance Regulations. Our group-level compliance organization consists of the Compliance Committee, which is chaired by the President, and the Compliance Division, which acts as a secretariat for this committee and is also responsible for the drafting and implementation of related measures. Workplace-level initiatives are implemented by the Compliance Headquarters Promotion Group, together with compliance officers and compliance promotion officers in coordinating branches and general branches. We also maintain the Nittsu Speak Up internal reporting system as a mechanism for the early detection and rectification of compliance violations. There is also an internal investigation team. Personal Information Protection Stringent information management is required to comply with various laws and regulations, including Japan s Personal Information Protection Law. The protection of personal information was previously the responsibility of the Compliance Division, but in February 2005, we strengthened our systems in this area by establishing a specialist unit, the Nippon Express Privacy Mark Personal Information Management Section. The approval certificate Personal Information Management Section has formulated the Personal Data Protection Policy and the Compliance Program for the Protection of Personal Data. The section has also implemented organizational measures, including the deployment of personal information management officers and staff. In addition, it implements training and awareness programs designed to raise awareness among employees throughout the Nippon Express organization about the need to protect personal information. On March 23, 2007, Nippon Express was given approval to use the Privacy Mark. This status was granted after stringent documentary audits and on-site inspections by the Japan Information Processing Development Corporation (JIPDEC). Compliance system Compliance Committee 1. Chairman: President 2. Co-chairman: Executive Vice President (Presides over the Compliance Division) 3. Advisors: Corporation lawyers, certified public accountants, tax accountants, etc. Internal Review Team Secretariat Compliance Division Compliance Headquarters Promotion Group Audit Division Internal reporting, consultation, external reception (Reception office for corporation lawyers) Internal reporting, consultation, reception, reviews (Internal reception office) Planning, education, guidance Audit departments in regional managing branches Regional managing branches, branch offices Compliance Administrator Compliance Promotion Officer

32 DIRECTORS, OFFICERS & CORPORATE AUDITORS CHAIRMAN DIRECTORS, MANAGING OFFICERS Masahiko Okabe Mitsuzo Segawa Keiji Hagio PRESIDENT, CHIEF EXECUTIVE OFFICER Masanori Kawai Takakazu Omae Masao Hosokoshi EXECUTIVE VICE PRESIDENTS, EXECUTIVE OFFICERS Masaki Izumikawa Takao Ohara Keiichiro Yokoyama 29 DIRECTOR, OFFICER Keiichi Nakatani Yasuo Ito Minoru Miida DIRECTOR, SENIOR MANAGING OFFICER Kenji Watanabe Jiro Nakamura MANAGING OFFICER FULL-TIME CORPORATE AUDITORS Noriyuki Marumoto Ryoichi Hashimoto Osamu Abe Zenjiro Watanabe Hiroaki Sano OFFICERS CORPORATE AUDITOR Yoichiro Tsuri Satoshi Miyahara Tsutomu Takeuchi Kenryo Senda Sakae Uematsu Shotaro Moriya Yukio Nagata Yoshiaki Ishii Masatoshi Nakano Kenichiro Nanri Shuji Kojima Yuzuru Fujita

33 ENVIRONMENTAL & SOCIAL CONTRIBUTIONS 30 Commemorating our 70th anniversary October 1, 2007 was the 70th anniversary of the establishment of Nippon Express. Our decision to include a range of environmental initiatives in the commemorative program for this milestone reflects our awareness that an increased emphasis on countering environmental problems is essential to achieving sustainable growth in the future. Children s Forest Program click donations The Children s Forest Program is an initiative of the Organization for Industrial, Spiritual and Cultural Advancement (OISCA). Its aim is to instill love and respect for nature in young people by allowing them to plant and tend young trees in the grounds of their schools and the surrounding areas. Nippon Express supports this concept and has created a page on its website where visitors can donate simply by clicking a button. Each time the button is clicked, Nippon Express donates one yen to the Children s Forest Program on behalf of the visitor. Forest development program Since 2006, Nippon Express has had a relationship with Iide-machi, a town in Yamagata Prefecture, through the town s promotion of eco-tourism. As part of its 70th anniversary Maintaining the forest program, Nippon Express began to support a forest development program in the Nakatsugawa district of Iide-machi. Nippon Express provides partial funding for the project, and its employees participate in development activities on a voluntary basis. emissions of carbon dioxide (CO2). Nippon Express is implementing a variety of initiatives to facilitate this change. The Super Green Shuttle train service has been operating between Tokyo and Osaka since The Super Green Shuttle Liner service We also provide regular shipping services between Tokyo and Hokkaido using nine large vessels, including ships operated jointly with MOL Ferry Co., Ltd. Accelerated acquisition of environmental certification Nippon Express actively obtains environmental certification as the basis for an expanded commitment to environmental protection. We first achieved ISO certification in 1998 at ISO certificates three sites in the Baraki district of Ichikawa City, Chiba Prefecture. By March 2008, a total of 12 sites, mostly in the air transport field, had been certified under this international standard. We are also obtaining certification under the Green Management system, which is a simplified environmental certification program for operators of small and medium-sized trucks. Individual sites can be certified under this system, which is administered by the Foundation for Promoting Personal Mobility and Ecological Transportation (Eco- Implementing a modal shift in transportation There is growing interest in shifting the main means of transportation from trucks to rail and shipping (modal shift) as a way of reducing Compressed natural gas (CNG)-driven truck Hybrid truck Liquefied petroleum gas (LPG)-driven truck Rail Excellent for set time schedules, speed Can ship large volumes at once Low CO2 emissions Comparison of transportation modes VS. Truck VS. Use respective characteristics to select best combination Create reliable and clean shipping routes Coastal vessels Excellent safety with little damage to cargo Long-distance transport of large volumes Low cost Large commercial trucks Rail Coastal vessels Air CO2 emission level of each mode of transportation ,480 1,000 1,500 2,000 (g-co2/ton*) Source: Ministry of Economy, Trade and Industry Bulletin 66 (March 29, 2006) From Methods for calculating energy consumption from shipping cargo through professional cargo shipping services * Calculations assume maximum payload of 10,000-11,999 kg with 100% loading rate

34 Mo Foundation), an organization affiliated with the Japanese Ministry of Land, Infrastructure and Transport. We are progressively obtaining certification, especially at sites used for trucking and warehousing operations. By March 2008, Green Management certification had been achieved at 252 Nippon Express trucking sites and another 26 trucking sites operated by 11 group companies, as well as at 33 warehousing sites, including one operated by a group company. ISO certification acquired by: Tokyo Air Service Branch: Baraki Export Cargo Center, Baraki Air Cargo Distribution Center, Narita Airport Logistics Center / Nagoya Air Service Branch: Nagoya Distribution Center, Nagoya Air Cargo Center / Osaka Air Service Branch: Nanko Air Cargo Center / Fukuoka Air Service Branch: Fukuoka Air Cargo Center / Hiroshima Air Service Branch: Hiroshima Domestic Air Cargo Center / Sendai Air Service Branch: Sendai Airport Logistics Center / Takamatsu Air Service Center: Takamatsu Air Cargo Center / Shikoku Branch (Shikoku Heavy Haulage Construction Branch) Low-emission vehicles and eco-driving Nippon Express is progressively replacing its fleet of trucks with environment-friendly vehicles designed to reduce emissions of CO2 and other substances, especially hybrid vehicles and vehicles that comply with A digital tachograph Japan s new long-term emission regulations. By March 2008, we had deployed a cumulative total of 2,967 of these vehicles, compared with our target of 3,000. Another priority is the promotion of eco-driving, which means both ecological driving and economical driving. Every year, we provide comprehensive instructor training for employees who play a central role in our driving training programs. We have also installed digital drive recorders in our trucks to provide data that can be used to train employees in ecodriving techniques. In June 2006, the Japan Federation of Freight Industries acknowledged our efforts in this area by presenting us with an award for environmental conservation activities in the area of freight logistics. Development of reusable packaging Nippon Express aims to minimize the amount of waste resulting from its transportation activities, while also ensuring that customers goods are delivered safely. We develop our own reusable packaging materials, which have been used extensively for house-moving work since Our Ecology Konpo environment-friendly house-moving service has become especially popular. We are continually working to reduce waste and improve efficiency by reviewing our packaging methods and developing new packaging materials for all types of household goods. Our Pasokonpo range of packaging materials for IT products are also reusable. The materials, which consist of a special shock-absorbent film used to wrap the products, together with tough exterior boxes, are widely used when returning computers and other precision equipment for repairs. Various reusable packing materials The logotype for Ecology Konpo Reusable shoe box Protective box for tableware 31 Topic 1 Green logistics award At the Green Logistics Partnership Conference in December 2007, the Minister of Land, Infrastructure and Transport presented awards in recognition of significant contributions made by the logistics industry to counter global warming. Kagawa Matsushita Electric Works, Ltd., Asahi Tsusho K.K., Japan Freight Railway Company, Jumbo Ferry Co., Ltd. and Nippon Express received the Minister of Economy, Trade and Industry Award for their efforts to reduce CO2 emissions. These efforts include a modal shift to rail and shipping, and the arrangement of shipments for the return trips of vehicles after goods have been delivered. Another award, presented by the Director-General for Policy Planning of the Ministry of Land, Infrastructure and Transport, was given to the Shihoro Agricultural Cooperative Association, Japan The minister of land infrastructure and transport award certificate Freight Railway Company and Nippon Express for an initiative to reduce energy consumption and promote clean agriculture and green logistics through a modal shift from trucks to rail for potato transportation from the Tokachi area in Hokkaido. The above awards were first introduced in In fiscal 2007, Nippon Express, together with the Japan Freight Forwarders Association, Japan Freight Railway Company and Zenkoku Tsuun K.K., received the Minister of Economy, Trade and Industry Award for the Super Green Shuttle project.

35 32 Nippon Express family concerts Since 1986, sisters Saori Yuki and Sachiko Yasuda have delighted a growing number of fans throughout Japan with songs that remind listeners of the beauty and expressive richness of the Japanese language. In A local stage school concert 1995, Nippon Express began to sponsor concerts of children s songs by this popular duo. There have been over 2,000 of these performances, which in fiscal 2007 were presented under a new title: Nippon Express Presents Saori Yuki and Sachiko Yasuda Songs with Your Life Concert Songs to the Future. In 2002, Nippon Express also became a co-sponsor of Local Stage School Concerts presented by Saori Yuki and Sachiko Yasuda at junior high schools throughout Japan. The sisters launched these concerts to help young people to appreciate children s songs and other types of vocal music, and thereby help to ensure that Japan s precious heritage of songs is passed on to future generations. Historical documents donated to the Museum of Logistics The Museum of Logistics was established by the Forwarders Council in August 1998 to inform the general public about the continuing and important role of logistics in supporting modern society. Located in the Interior view of the Museum of Logistics Takanawa district of Tokyo s Minato Ward, the museum has a collection of 10,000 documents, 40,000 photographs, 2,000 artifacts and around 100 videos and films. Elementary and junior high schools use the facility for social education, while companies use it for employee training. Nippon Express has provided numerous exhibits and also supports the museum financially. Support for schools and local festivals Throughout its history, Nippon Express has achieved growth by working in partnership with local communities throughout Japan. We are extensively involved in community interaction initiatives, including traffic safety courses, and work experience programs for elementary school children, junior high school students and students from special needs schools. Nippon Nippon Express staff from Express also sponsors and participates in the Tokushima branch and other branches local festivals, and supports tree planting and litter removal campaigns. Other contributions include assistance with emergency contact systems for children and the elderly. Physical education activities As part of its contributions to society, Nippon Express is promoting sports by running various sports groups, including the Nippon Express Baseball Club and the Judo Club, Sumo Club and Kendo Club. The Company is providing sports lessons to local youth as well as bringing home good results in a variety of competitions. Nippon Express is also contributing to the promotion and protection of traditional Japanese Budo sports, such as judo, sumo and kendo. Sumo training at the Nippon Express sumo club Topic 2 The Kids X change program Nippon Express was the first Japanese company to support the YouthXchange initiative launched by the United Nations Educational, Scientific and Cultural Organization (UNESCO) and the United Nations Environmental Programme (UNEP). Since its initial publication in 2002, the YouthXchange program, which educates on responsible consumption using a guidebook and a website, has been translated into 15 languages and distributed worldwide to 400,000 people. We have edited YouthXchange materials for use by elementary school children to create the Kids X change program. The program has been distributed to numerous elementary schools in Japan and is now being used in educational activities. Habits formed by young people today will have a major influence on future consumption patterns. That is why instilling environmental values in young people is seen as an important part of aligning today s wasteful consumption with sustainable development. Through Kids X change, we emphasize the importance of education in forming the attitudes, values and behavior patterns of young people, including children, toward consumption.

36 Financial Section 33 TEN-YEAR SUMMARY MANAGEMENT DISCUSSION AND ANALYSIS CONSOLIDATED BALANCE SHEETS CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY CONSOLIDATED STATEMENTS OF CASH FLOWS NOTES TO CONSOLIDATED FINANCIAL STATEMENTS REPORT OF INDEPENDENT AUDITORS

37 TEN-YEAR SUMMARY FOR THE YEAR: Revenues * 1 1,901,433 1,866,267 1,793,925 Revenues by industry segment * 2 Distribution & transportation 1,597,284 1,580,546 1,522,325 Goods sales 291, , ,908 Other 12,225 6,640 4,690 Revenues by geographic segment * 2 Japan 1,682,699 1,666,887 1,631,402 The Americas 48,009 45,126 38,495 Europe 69,146 59,422 49,333 Asia & Oceania 101,578 94,831 74,693 Operating income 48,502 50,325 43,187 Net income 36,439 33,208 18, AT YEAR-END: Total net assets * 3 520, , ,205 Total assets 1,297,406 1,360,694 1,315,599 Net cash provided by operating activities 90, ,058 63,966 Cash and cash equivalents at end of year 144, , ,615 PER SHARE: (Yen) Net assets per share Net income per share RATIOS: (%) Net assets to total assets Return on equity OTHER: Employees 69,177 67,773 65,562 (Average temporary employees) 24,434 23,796 24,190 *1 Revenue fi gures do not include consumption taxes. *2 The above fi gures for revenues by industry segment and by geographic segment do not include internal revenues or money transfers between the segments. *3 The calculation of net assets is carried out by applying the Accounting Standards for Description of Net Assets in the Balance Sheet (Accounting Standards Board of Japan, Accounting Standards for Business Enterprises, No. 5 dated December 9, 2005) and the Application Guidelines for Accounting Standards and Others for Description of Net Assets in the Balance Sheet (Accounting Standards Board of Japan, Application Guideline for Accounting Standards for Business Enterprises, No. 8 dated December 9, 2005) from the year ended March 31, Revenues Operating income Net income ( million) ( million) ( million) 2,000,000 60,000 40,000 50,000 1,500,000 30,000 40,000 1,000,000 30,000 20,000 20, ,000 10,000 10,

38 Millions of yen ,753,306 1,666,945 1,676,918 1,708,140 1,760,687 1,637,758 1,643,022 1,485,266 1,419,156 1,429,489 1,454,133 1,491,528 1,423,825 1,428, , , , , , , ,758 4,823 4,703 4,440 5,108 5,259 5,039 3,208 1,605,602 1,556,828 1,566,037 1,590,309 1,652,365 1,553,058 33,722 31,297 36,055 45,944 42,520 35,916 45,525 38,688 37,406 33,997 28,626 21,639 68,455 40,130 37,419 37,889 37,174 27,144 43,025 46,156 42,802 33,370 35,283 35,916 44,820 32,190 27,263 23,330 21,180-26,589 24,040 25, , , , , , , ,547 1,287,351 1,262,383 1,205,103 1,248,205 1,230,342 1,184,181 1,147,993 83,139 83,108 48, ,752 89,057 75, , , , , , , ,321 64,699 65,160 66,716 66,219 68,335 24,400 25,321 25,701 27,263 27,075 22,049 Total net assets Total assets Net cash provided by operating activities ( million) ( million) ( million) 600,000 1,500, , , ,000 1,000, , , , ,000 50, ,

39 MANAGEMENT DISCUSSION AND ANALYSIS 36 CURRENT STATUS OF THE CONSOLIDATED COMPANY AND ITS OPERATIONS The Nippon Express Group is composed of Nippon Express and its 292 subsidiary companies, including 267 consolidated subsidiaries and one equity-method subsidiary, as well as 67 affiliates, of which 21 are equity-method affiliates. In total, the Group consists of 360 companies, with 292 of these within Japan and 68 overseas. Distribution and transportation operations, like motor transportation, railway utilization transportation and marine and harbor transportation, form the core of the Company, but we are also developing operations in goods sales and other areas such as real estate. In distribution and transportation operations, there are 242 domestic transportation companies, including Nippon Express Co., Ltd. and Nippon Truck Co., Ltd., and 60 companies operating overseas, including Nippon Express U.S.A., Nippon Express (U.K.) Ltd., Nippon Express (Nederland) B.V., Nippon Express (Deutschland) GmbH, Nippon Express (H.K.) Co., Ltd. and Nippon Express (Singapore) Pte. Ltd. In goods sales operations, there are 26 domestic companies including Nittsu Shoji Co., Ltd. as well as six overseas companies operating under Nippon Express U.S.A. Other operations include 23 domestic businesses, including Nittsu Express Real Estate Co., Ltd., Nippon Express Capital Co., Ltd. and two overseas businesses. PERFORMANCE OVERVIEW Business Environment and Activities during the Period During the fiscal year under review, the Japanese economy was characterized by sluggishness in certain sectors, and by falling public investments and housing investments. These factors were attributable to the soaring prices of crude oil and other natural resources, as well as to concerns about a slowdown in the U.S. economy, triggered by the subprime mortgage crisis. Meanwhile, exports continued to increase on the back of continued expansion in overseas economies, and capital expenditures also rose on the strength of high corporate earnings. Given these demand conditions at home and abroad, business conditions remained favorable although the expansionary trend slowed. In the field of logistics, demand for international freight transportation continued to grow overall. However, the business environment remained difficult as demand for domestic freight transportation continued to decline. The business climate surrounding the field of logistics was made even more difficult by the soaring fuel expenses and our corporate customers accelerated efforts to streamline their distribution operations. In this severe business environment, the Nippon Express Group made all-out efforts to strengthen its earnings in accordance with the Three-Year Power Up Plan Challenging New Horizons in Innovation with Our Customers, which was in its second year. On the sales side, the Company strove to increase its competitiveness through modal partnerships and system partnerships on a global scale, along with enhancing and upgrading its overseas network. We provide worldwide land, air and sea transportation, and are taking actions to enhance the third-party logistics (3PL) business in which Nippon Express can leverage its expertise and advantages, such as a multitude of information systems. While providing services that are tailored domestically and internationally to each region, we are also actively expanding our operations. On the management side, in order to reinforce our management structure, we are extending our use of IT resources and working to increase the effectiveness of group management with the aim of using management resources efficiently, securing a low-cost structure and making more effective use of our assets. To carry out our social responsibilities as a corporation, we are taking action to promote compliance by keeping everyone Cash and cash equivalents at end of year Net assets per share Net income per share ( million) ( ) ( ) 200, , , ,

40 informed about rules and regulations, implementing CSR education and strengthening inspection and guidance at each business site. In addition, in pursuit of ever-higher quality, we are enhancing our internal education system and developing talent to reinforce our capabilities at local sites. MANAGEMENT PERFORMANCE Revenues and Cost of Goods Sold As shown in the results below, consolidated revenues amounted to 1,901.4 billion, which represents an increase of 35.1 billion, or 1.9%, over the previous fiscal year. Broken down by region, Japan grew by 1.1% over the previous year, the Americas by 5.4%, Europe by 16.7% and Asia/Oceania by 5.8%, as revenues continued to increase in every region. Overseas revenues grew by billion overall, a 12.3% increase, and overseas revenues now account for 21.2% of total revenues, an increase of 0.2 percentage points in the overseas sales ratio. The main contributions to the revenue increase in distribution and transportation operations came from growth in warehousing, shipping and motor transportation, and were centered on production bases belonging to the clients of Nippon Express overseas subsidiaries. In goods sales operations, revenue contributions came from a rise in the unit cost of sales in the petroleum business, and in other operations from the acquirement of a human resource services business. Cost of goods sold came to 1,769.7 billion, a 34.5 billion, or 2.0% increase over the previous fiscal year. Gross profits came to billion, which represents a 0.6 billion, or 0.5% year-on-year increase, while the ratio of gross profits to sales fell to 6.9%, a decrease of 0.1 percentage points. The main factors behind the increase in the cost of goods sold were increases in outsourcing costs for vehicle leasing and subcontracting fees that accompanied the revenue increase in distribution and transportation operations; the sharp rise in fuel expenses; an increase in depreciation and amortization expenses caused by a change in the depreciation and amortization system accompanying a revision of the Japanese tax system, and an appreciation in the purchase price in the petroleum business in goods sales operations. Selling, General and Administrative Expenses and Operating Income Selling, general and administrative expenses rose by 2.4 billion to 83.1 billion, or a 3.0% year-on-year increase, primarily due to an increase in the number of consolidated subsidiaries. The ratio of selling, general and administrative expenses to revenues was 4.3%, the same level as the previous fiscal year. As a result, operating income amounted to 48.5 billion, a decrease of 1.8 billion, or 3.6 %, from the previous fiscal year. The operating income ratio was 2.6%, a decrease of 0.1 percentage points. Other Profits and Losses and Net Income Extraordinary profits were 17.2 billion, an increase of 8.9 billion or 107.1% year on year, while extraordinary losses amounted to 9.4 billion, an increase of 2.6 billion, or 38.2 %, over the previous year. The main reason for the increase in extraordinary profits was a gain from the transfer to the defined contribution pension system of 7.8 billion, accompanying the change from a lump sum retirement payment system to a defined contribution pension system. The main reasons for the increase in extraordinary losses were 1.2 billion in management costs for the parcel delivery business integration, and losses from the sale of fixed assets. Income before income taxes and minority interests was 63.7 billion. After adjusting for corporate taxes, local and franchise taxes, deferred income taxes and minority interests, net income came to 36.4 billion, an increase of 3.2 billion, or 9.7%, over the previous year. 37 Net assets to total assets Return on equity Employees (%) (%) (Average temporary employees) , , , ,

41 38 Net income per share came to for the period, an increase of 3.1. Shareholders equity stood at 7.16% of net income, a year-on-year improvement of 0.49 percentage points. Segment Information Segment results are summarized as follows: (Revenue details) Increase/ Decrease (Millions of yen) Change (%) Transportation 1,584,476 1,600,988 16, Goods sales 365, ,964 12, Other 20,115 28,629 8, Total 1,970,171 2,007,582 37, (Operating income details) Increase/ Decrease (Millions of yen) Change (%) Transportation 45,940 43,896 (2,044) (4.4) Goods sales 5,351 5, Other 1,275 1,061 (213) (16.7) Total 52,567 50,710 (1,856) (3.5) Distribution and Transportation Operations In Japan, there were weak results in air freight forwarding for handling volumes of international freight, but overseas handling volumes grew in all regions of the Americas, Europe and Asia/ Oceania, and the number of consolidated subsidiaries increased as well. Overall, revenues grew by 16.5 billion year on year, or 1.0%, to a total of 1,600.9 billion. Owing to the sharp rise in fuel costs and the effect of the change of the depreciation and amortization system that accompanied the taxation system revision, operating profits were 43.8 billion, a decrease of 2.0 billion, or 4.4%. Goods Sales Operations The unit cost of sales for petroleum rose. Due to this and other factors consolidated revenues reached billion, a year-on-year increase of 12.3 billion, or 3.4%. We took steps to cut operating costs, and due to this and other factors operating income reached 5.7 billion, a year-on-year increase of 0.4 billion, or 7.5%. Other Operations In March 2008, we acquired a human resource services business. Due to the impact of this acquisition and other factors, consolidated revenues came to 28.6 billion, a year-on-year increase of 8.5 billion, or 42.3%. Due to the increase in operating costs and other factors, operating income was 1.0 billion, a year-on-year decrease of 0.2 billion, or 16.7%. Results by region are summarized as follows: Japan Revenues decreased in distribution and transportation operations due to decreased handling volumes for international-related cargo by air freight forwarding. However, an increase in revenues in goods sales operations and other businesses brought overall consolidated revenues in Japan to 1,696.1 billion, an increase of 18.6 billion, or 1.1%, year on year. Operating income was 38.6 billion, a decrease of 2.3 billion, or 5.6%, year on year. This was due to the impact of the change to the depreciation and amortization method resulting from the revision of the Japanese tax system, and higher costs due to the sharp rise in fuel expenses. The Americas Exports in the air freight forwarding and marine and harbor transportation business grew, as did handling volumes in the warehousing business. As a result consolidated revenues were 59.8 billion, an increase of 3.0 billion, or 5.4%, year on year. Operating income was 3.6 billion, an increase of 0.3 billion, or 10.5%, year on year. Europe Handling volumes increased in both the warehousing business and the motor transportation business. In addition, there was an impact from the appreciation of the euro, resulting in consolidated revenues of 77.5 billion, an increase of 11.1 billion, or 16.7%, year on year. However, due to the up-front costs of launching new warehouses, operating costs increased 18.2% year on year while operating income came to 3.0 billion, a decrease of 0.3 billion, or 10.3%, year on year. Asia & Oceania Exports and imports in the marine and harbor transportation business grew, as did handling volumes in the warehousing business and motor transportation business. In addition, there was an increase in the number of consolidated subsidiaries. Due to these and other factors, consolidated revenues rose 6.0 billion, or 5.8%, year on year to billion. Operating income grew by 0.5 billion, or 12.6%, year on year to 5.0 billion. Note: Figures shown do not include consumption taxes. CASH FLOW For the fiscal year under review, cash and cash equivalents ( cash ) decreased by 25.4 billion year on year. With the additional impact of a modification in the scope of consolidation, total cash flow came to billion. Cash Flow from Operating Activities Funds obtained during the fiscal year as a result of operating activities reached 90.0 billion, down from billion in the previous fiscal year. This figure was calculated by accounting for such items as income before income taxes and minority interests of 63.7 billion, depreciation and amortization expenses of 84.9 billion and income taxes paid of 18.8 billion.

42 Cash Flow from Investing Activities Funds used in investing activities during the fiscal year came to billion, up from 89.4 billion in the previous fiscal year. A total of billion was spent on investment for distribution bases, provision and maintenance of warehouse facilities, and acquisition of vehicles, among other activities, while disposal of fixed assets brought in 9.0 billion. Cash Flow from Financing Activities Funds used in financing activities came to 10.2 billion, down from 16.3 billion in the previous fiscal year. This figure includes proceeds from long-term debt of 43.0 billion, a 64.1 billion repayment of long-term debt, proceeds from issuing bonds of 20.0 billion and cash dividends of 9.4 billion. FINANCIAL POSITION Assets Total assets at the end of the fiscal year were 1,297.4 billion, a year-on-year decrease of 63.2 billion, or 4.7%. Current assets were billion, a decrease of 33.7 billion, or 6.4%, while fixed assets were billion, down 29.5 billion, or 3.6%. The primary factors behind the fall in current assets were decreases in cash and cash in banks, outstanding accounts for sales and accounts receivables. The value of fixed assets includes an increase of 13.1 billion for buildings, and a decrease of 46.4 billion in marketable securities based on the end-of-period valuation. Liabilities and Shareholders Equity Total liabilities at the end of the fiscal year were billion, a decrease of 66.5 billion, or 7.9%, year on year. Current liabilities increased by 17.1 billion, or 3.6%, to billion, while long-term liabilities fell 83.7 billion year on year, or 22.4%, to billion. The major factors behind the increase in current liabilities include an increase in short-term redeemable bonds. The major factors behind the decrease in long-term liabilities include a decrease in bonds, long-term debt and provision for retirement benefits. Net assets amounted to billion at the end of fiscal 2008, an increase of 3.3 billion, or 0.6%, from the end of fiscal The major contributor to the increase in net assets was 36.4 billion in net income for the period. In addition, the valuation of marketable securities fell by 25.2 billion. Total equity per share came to , a year-on-year increase of The shareholders equity ratio was 39.33%, an increase of 2.0 percentage points. CAPITAL INVESTMENT The Nippon Express Group carried out a total of billion in capital investment during fiscal This includes logistics bases for the restructuring of domestic and international logistics, provision and maintenance of warehouse facilities, replacement of motor vehicles and transport equipment, as well as leased equipment for the handling of leases with customers. Investment in plant and equipment by segment was as follows: (Millions of yen) 2008 Change (%) Distribution and transportation 55, Goods sales 54, Other 1,075 (5.9) Subtotal 111, Eliminations (106) Total 111, Dividend Policy Nippon Express regards the return of profits to shareholders as one of its most important policies. As it strives to build up its operations, strengthen its financial soundness and improve profitability, the Company intends to continually raise the value of its shareholders equity as well as its dividend, while maintaining a focus on dividend stability. Nippon Express basic policy is to pay dividends from retained earnings twice a year one mid-term dividend and one dividend at the end of the year. Decisions regarding these dividends are taken at the Board of Directors meeting for the mid-term dividend distribution and the General Shareholders Meeting for the yearend dividend distribution. At the 102nd General Shareholders Meeting on June 27, 2008, we proposed and received approval for a normal dividend of 4 plus a dividend of 1 to commemorate the 70th anniversary of the founding of our company, resulting in a total dividend of 5 per share. Together with the 5 per share dividend for the mid-term (a normal dividend of 4 and a commemorative dividend of 1), dividends came to 10 per share for the year. Retained earnings reinvested within the Company will be used to expand sales of various transport products and improve transportation efficiency. This is in line with our policy to make the best use of such investments as provisioning and maintaining logistics bases and replacing vehicles. Through these investments, we plan to strengthen our financial situation and secure a stable foundation for management. 39 Interest-bearing Debt Interest-bearing debt at the end of the fiscal year decreased by 1.5 billion, or 0.4%, to billion due to a reduction in borrowed funds, an increase in commercial paper and other factors.

43 FINANCIAL STATEMENTS Nippon Express Co., Ltd. and consolidated subsidiaries CONSOLIDATED BALANCE SHEETS As of March 31, 2008 and 2007 Millions of yen Thousands of U.S. dollars (Note 1) ASSETS Current assets: Cash and cash in banks (Notes 2, 3 and 4) 147, ,507 $ 1,474,594 Trade receivables (Notes 2, 4 and 10) Notes and accounts 300, ,635 2,997,880 Less: allowance for doubtful accounts (1,453) (1,805) (14,505) Inventories (Note 2) 6,248 7,130 62,361 Deferred tax assets (Notes 2 and 8) 17,091 14, ,595 Other current assets 28,146 28, ,933 Total current assets 498, ,908 4,971,860 Property and equipment (Notes 2, 4 and 7): 40 Land 168, ,327 1,681,814 Vehicles 242, ,289 2,419,753 Buildings and structures 560, ,863 5,594,284 Machinery and tools 229, ,440 2,287,012 Property on leases 155, ,719 1,551,860 Construction in progress 7,758 11,391 77,441 Less: accumulated depreciation (778,397) (756,013) (7,769,209) Net property and equipment 585, ,018 5,842,958 Investments and other assets: Investments in securities (Notes 2 and 4) 129, ,279 1,297,480 Investments in subsidiaries and affi liates (Note 2) 13,098 11, ,736 Loans to employees 2,665 3,192 26,605 Others (Note 2) 68,111 63, ,822 Total investments and other assets 213, ,767 2,134,644 Total assets 1,297,406 1,360,694 $ 12,949,462 The accompanying notes are an integral part of these statements.

44 Millions of yen Thousands of U.S. dollars (Note 1) LIABILITIES AND NET ASSETS (SHAREHOLDERS EQUITY) Current liabilities: Short-term bank loans (Note 4) 3,790 4,986 $ 37,837 Current portion of long-term debt (Note 4) 113,916 63,660 1,137,004 Accounts payable 178, ,770 1,780,268 Deposits from employees 31,309 32, ,506 Income taxes payable (Note 8) 8,740 10,585 87,238 Other current liabilities (Notes 2 and 4) 150, ,719 1,506,305 Total current liabilities 487, ,898 4,861,160 Long-term liabilities: Long-term debt, less current portion (Note 4) 194, ,513 1,938,107 Retirement benefi ts obligation (Notes 2 and 5) 54,193 87, ,906 Deferred tax liabilities (Notes 2 and 8) 18,833 24, ,978 Other long-term liabilities 22,337 15, ,955 Total long-term liabilities 289, ,279 2,889,948 Total liabilities 776, ,177 7,751, Minority interests Contingent liabilities (Note 10) Net assets (Shareholders equity) (Note 11): Common stock 70,175 70, ,421 Additional paid-in capital 26,909 26, ,588 Retained earnings 369, ,890 3,685,642 Less: treasury stock (Note 6) (11,504) (11,426) (114,829) Net unrealized gains on securities (Note 2) 50,194 75, ,989 Net unrealized gains on hedge transactions (7) 5 (72) Foreign currency translation adjustment 5,221 4,858 52,114 Minority interests 10,569 9, ,498 Total net assets 520, ,516 5,198,353 Total liabilities and net assets 1,297,406 1,360,694 $ 12,949,462 The accompanying notes are an integral part of these statements.

45 CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS For the years ended March 31, 2008 and 2007 Millions of yen Thousands of U.S. dollars (Note 1) Revenues (Note 2) 1,901,433 1,866,267 $ 18,978,280 Operating costs 1,769,799 1,735,242 17,664,435 Gross profi t 131, ,024 1,313,845 Selling, general and administrative expenses 83,132 80, ,744 Operating income 48,502 50, ,100 Other income and expenses: Interest and dividend income 3,935 3,168 39,278 Interest expenses (4,379) (4,078) (43,710) Gain on sales of securities, net ,717 Gain on sales or disposal of property and equipment, net 1,474 2,125 14,717 Equity in earnings of unconsolidated companies (Note 2) 917 1,034 9, Gain on shifting to DC pension plan (Note 5) 7,858 78,430 Others, net 4,740 5,866 28,293 Income before income taxes and minority interests 63,721 58, ,011 Income taxes (Notes 2 and 8): Current 16,991 20, ,591 Deferred 9,416 4,141 93,989 26,408 25, ,580 Minority interests (874) (607) (8,729) Net income 36,439 33,208 $ 363,701 Yen U.S. dollars Per share data (Note 2): Net income $ Cash dividends, applicable to earnings of the year The accompanying notes are an integral part of these statements.

46 CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY For the years ended March 31, 2008 and 2007 Common stock Additional paid-in capital Retained earnings Treasury stock Millions of yen Unrealized gain (loss) on securities Unrealized gain (loss) on derivatives Foreign currency translation adjustment Minority interests Balance at March 31, ,175 26, ,506 (11,316) 84,314 1,617 8, ,326 Cash dividends (8,345) (8,345) Directors bonuses (182) (182) Net income 33,208 33,208 Increase in treasury stock (Note 6) (125) (125) Decrease in treasury stock (Note 6) Increase (Decrease) of consolidated subsidiaries Increase (Decrease) of affi liated company Net change during the year (8,828) 5 3,241 1,497 (4,084) Balance at March 31, ,175 26, ,890 (11,426) 75, ,858 9, ,516 Total Millions of yen Common stock Additional paid-in capital Retained earnings Treasury stock Unrealized gain (loss) on securities Unrealized gain (loss) on derivatives Foreign currency translation adjustment Minority interests Balance at March 31, ,175 26, ,890 (11,426) 75, ,858 9, ,516 Cash dividends (9,386) (9,386) Net income 36,439 36,439 Increase in treasury stock (Note 6) (111) (111) Decrease in treasury stock (Note 6) Increase (Decrease) of consolidated subsidiaries Increase (Decrease) of affi liated company Net change during the year (25,291) (12) (23,990) Balance at March 31, ,175 26, ,264 (11,504) 50,194 (7) 5,221 10, ,823 Total 43 Common stock Additional paid-in capital Retained earnings Thousands of U.S. dollars (Note 1) Treasury stock Unrealized gain (loss) on securities Unrealized gain (loss) on derivatives Foreign currency translation adjustment Minority interests Balance at March 31, 2006 $594,453 $227,940 $2,681,121 $(95,857) $714,222 $13,706 $68,792 $4,204,381 Cash dividends (70,693) (70,693) Directors bonuses (1,546) (1,546) Net income 281, ,305 Increase in treasury stock (Note 6) (1,059) (1,059) Decrease in treasury stock (Note 6) Increase (Decrease) of consolidated subsidiaries Increase (Decrease) of affi liated company 5,435 5,435 Net change during the year (74,782) 46 27,454 12,681 (34,600) Balance at March 31, 2007 $594,453 $227,948 $2,896,153 $(96,797) $639,440 $46 $41,160 $81,473 $4,383,878 Total Common stock Additional paid-in capital Retained earnings Thousands of U.S. dollars (Note 1) Treasury stock Unrealized gain (loss) on securities Unrealized gain (loss) on derivatives Foreign currency translation adjustment Minority interests Balance at March 31, 2007 $700,421 $268,588 $3,685,642 $(114,829) $ 500,989 $ (72) $52,114 $105,498 $4,383,878 Cash dividends (93,691) (93,691) Net income 363, ,701 Increase in treasury stock (Note 6) (1,112) (1,112) Decrease in treasury stock (Note 6) Increase (Decrease) of consolidated subsidiaries Increase (Decrease) of affi liated company 2,870 2,870 Net change during the year (252,437) (127) 3,616 9,502 (239,446) Balance at March 31, 2008 $700,421 $268,588 $3,685,642 $(114,829) $ 500,989 $ (72) $52,114 $105,498 $5,198,353 The accompanying notes are an integral part of these statements. Total

47 CONSOLIDATED STATEMENTS OF CASH FLOWS For the years ended March 31, 2008 and Millions of yen Thousands of U.S. dollars (Note 1) Cash fl ows from operating activities: Income before income taxes and minority interests 63,721 58,918 $ 636,011 Depreciation and amortization 84,957 80, ,968 Provision for allowance for doubtful accounts, net (4) (1,004) (48) Provision for retirement benefi ts, net (25,269) (6,920) (252,214) Gain on sale or disposal of property and equipment, net (1,468) (2,111) (14,654) Gain on shifting to DC pension plan (7,858) (78,439) Expense of consolidation for small-package delivery business 1,208 12,062 Gain on sale or write-down of securities, net 676 1,154 6,752 Equity in earnings of unconsolidated subsidiaries and affiliates (917) (1,034) (9,157) Increase in accounts payable following the shift to the DC pension plan 16, ,741 Increase (decrease) in trade receivables 10,684 (13,925) 106,638 Decrease in inventories ,033 Increase in other current assets 387 (2,279) 3,870 Increase (decrease) in accounts payable (9,523) 10,704 (95,058) Decrease (increase) in income taxes payable (1,845) (3,644) (18,415) Increase (decrease) in other current liabilities (17,771) 23,672 (177,375) Other (506) 4,108 (5,057) Sub-total 113, ,568 1,131,659 Interest and dividends received 4,277 3,317 42,689 Interest paid (4,361) (4,082) (43,533) Cash paid for the shifting to DC pension plan (4,027) (40,199) Payment for promotional expenses on the combination of small package delivery business (273) (2,725) Income taxes paid (18,899) (24,745) (188,635) Net cash provided by operating activities 90, , ,253 Cash fl ows from investing activities: Payment for purchase of property and equipment (118,023) (96,152) (1,177,993) Proceeds from sale of property and equipment 9,046 12,287 90,296 Payment for purchase of securities (217) (4,083) (2,173) Proceeds from sale of securities 3,905 2,454 38,981 Change in investments (11) (3,955) (113) Net cash used in investing activities (105,299) (89,449) (1,051,002) Cash fl ows from fi nancing activities: Proceeds from issuance of bonds 20, ,620 Change in short-term bank loans (1,849) 167 (18,462) Change in commercial paper 3,000 (5,500) 29,943 Net increase in securitized lease receivables (1,367) 4,883 (13,651) Proceeds from long-term debt 43,033 41, ,514 Payment of long-term debt (64,147) (49,095) 640,255 Redemption of bonds (200) Cash dividends (9,487) (8,443) 94,696 Net increase in treasury stock (77) (109) (770) Other ,914 Net cash used in fi nancing activities (10,203) (16,305) (101,842) Effect of exchange rate changes on cash (88) 1,518 (888) Net increase in cash and cash equivalents (25,496) 18,821 (254,478) Cash and cash equivalents at beginning of year 170, ,615 1,697,868 Increase in cash and cash equivalents due to increase of consolidated subsidiaries Cash and cash equivalents at end of year (Notes 2 and 3) 144, ,109 $ 1,443,647 The accompanying notes are an integral part of these statements.

48 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Nippon Express Co., Ltd. and consolidated subsidiaries 01 BASIS OF PRESENTING FINANCIAL STATEMENTS The accompanying consolidated financial statements of Nippon Express Co., Ltd. ( the Company ) and consolidated subsidiaries are prepared on the basis of accounting principles generally accepted in Japan, which are different in certain respects as to the application and disclosure requirements of International Financial Reporting Standards, and are compiled from the consolidated financial statements prepared by the Financial Instruments and Exchange Law of Japan. In order to facilitate the understanding of readers outside Japan, certain reclassifications are made to the consolidated financial statements prepared for domestic reporting purposes. In addition, the notes to the consolidated financial statements include information that is not required under accounting principles generally accepted in Japan but is presented herein as additional information. The yen amounts are rounded off in millions. Therefore, total or subtotal amounts do not correspond with the aggregation of such account balance. U.S. dollar amounts presented in the financial statements are included solely for convenience. The rate of to US$1.00, prevailing on March 31, 2008, has been used for translation into U.S. dollar amounts in the financial statements. The U.S. dollar amounts are then rounded off in thousands. The inclusion of such amounts should not be construed as a representation that Japanese yen amounts have been or could in the future be converted into U.S. dollars at that rate. 02 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (a) Consolidation The consolidated subsidiaries included 212 domestic and 55 foreign majority-owned subsidiaries for the years ended March 31, 2008, and 218 domestic and 55 foreign majority-owned subsidiaries for the years ended March 31, The excess cost of the Company s investments in consolidated subsidiaries over the fair value of the net assets of these companies at the dates of acquisition, consolidation goodwill, is amortized on the straight-line method over five years. Investments in an unconsolidated subsidiary and 21 affiliates are stated at cost plus equity in undistributed income as of March 31, 2008 and an unconsolidated subsidiary and 18 affiliates as of March 31, Investments in insignificant unconsolidated subsidiaries and affiliates have been carried at cost. 45 (b) Cash and cash equivalents Cash and cash equivalents presented in the accompanying consolidated statements of cash flows represent cash on hand, bank deposits, which are payable on demand, and short-term investments with original maturities of three months or less which are easily convertible into cash and present insignificant risk of changes in value. (c) Securities Other securities with market value are stated at market value on the balance sheet date. Cost of sold securities is stated using the moving-average method. The differences between the acquisition costs and the carrying values of securities are recognized in unrealized gain [loss] on securities. Unrealized gain [loss] on securities, net of applicable income taxes, is charged to net assets. Other securities without market value are stated at cost determined by the moving-average method. (d) Inventories Purchased and finished goods, work in process, raw materials, and supplies are valued at cost, primarily determined by the moving-average method.

49 (e) Allowance for doubtful accounts General provision for doubtful receivables is provided by applying a certain reserve percentage of the receivables based on experience from past transactions. When considered necessary, specific reserves are made based on the assessment of individual receivables. Allowance for doubtful receivables for non-current assets, which were included in Others in Investment and other assets, were 1,992 million ($19,883 thousand) and 1,632 million in 2008 and 2007, respectively. (f) Property and equipment, depreciation and lease transaction Property and equipment is stated at cost. Depreciation of property and equipment, except for building and leased assets, is mainly computed by the declining-balance method over the applicable useful lives. Building and leased assets are depreciated by the straight-line method over the estimated lives and the lease contract period, respectively. Under Japanese tax law, capital gains arising from disposals by expropriation of assets and other similar transactions are deducted from the cost of property and equipment acquired in substitution. Such capital gains amounted to 1,794 million ($17,905 thousand) and 6,183 million for the years ended March 31, 2008 and 2007, respectively. Finance lease transactions, except for those which meet the condition that the ownership of the leased asset is substantially transferred to the lessee, are accounted for as operating lease transactions. 46 (Changes in depreciation rules for property and equipment) The Company and its domestic subsidiaries have adopted the Revision of the corporate tax law and changed the depreciation method for property and equipment acquired after April 1st, As a result of this change, operating income and ordinary income as well as income before income taxes and minority interests decreased by 1,375 million ($13,724 thousand), respectively. (Additional information) For property and equipment acquired before March 31, 2007, the Company and its domestic subsidiaries amortized the residual book-value, the amount equivalent to 5% of acquisition costs using a straight-line method over five years from the following fiscal year when the depreciation has ended to a final depreciable limit under the pre-revised Corporate Tax Law. The amortized amount is included in depreciation expenses. As a result of this change, operating income, ordinary income and income before income taxes and minority interests decreased by 2,123 million ($21,189 thousand), respectively. (g) Deferred charges Bond Issuance cost which can be deferred under the Corporation Law is charge to income as expended. (h) Income taxes Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect of deferred tax assets and liabilities of a change in tax rate are recognized in income in the period that includes the enacted date. (i) Retirement benefits obligation and pension plan Substantially all of the employees are entitled to lump-sum payments upon retirement or severance of employment. Accrual for the lump-sum payments is stated at the present value of the estimated future obligations arising from services performed to the end of the fiscal year. Certain consolidated subsidiaries have instead implemented the Qualified Corporate Pension Plan, which is a private non-contributory plan funded by the subsidiaries on the basis of an accepted actuarial method, and amortization of prior service cost has been charged to income. The retirement benefit obligation is attributed to each period by the straight-line method over the years of service. The net retirement benefit obligation at transition was charged to operations as incurred.

50 Actuarial gain and loss are amortized in the year following the year in which the gain or loss is recognized primarily by the straight-line method over the period of the average remaining years of service of the employees. The certain consolidated subsidiaries have separately provided an allowance for lump-sum retirement benefits to directors and statutory auditors, of which actual payments of such benefits are subject to the approval of the shareholders. Provision has been made for annual increases of such liability estimated systematically by management. (Additional information) On Oct. 1, 2007, the Company has changed retirement benefit plan and the certain portion of the lump-sum retirement plan is shifted to the Defined Contribution (DC) plan adopted by the Guidance on Accounting for Transfer between Retirement Benefit Plans (Accounting Standards Board of Japan Guidance No. 1). Gains on shifting from a lump-sum retirement plan to DC pension plan are 7,858 million ($78,431 thousand), included in other income and expenses of this year. (j) Per share data Basic net income per share is computed by dividing net income available to common shareholders, by the weightedaverage number of common shares outstanding for the period, retroactively adjusted for stock splits. Diluted net income per share in 2008 and 2007 is not disclosed because it is anti-dilutive. (k) Consumption tax Consumption tax with respect to the Company and its domestic subsidiaries is accounted for using the taxexcluded method CASH AND CASH EQUIVALENTS Reconciliation cash and cash equivalents at the end of year on the statements of cash flows for the years ended March 31, 2008 and 2007 are as follows: Millions of yen Thousands of U.S. dollars Cash and cash in banks in the consolidated balance sheets 147, ,507 $1,474,588 Time deposits with maturities of over three months (2,905) (3,206) (28,994) Time deposits pledged as collateral for debts (195) (190) (1,946) Cash and cash equivalents at end of year in the statements of cash flows 144, ,709 $1,443, SHORT-TERM BANK LOANS, COMMERCIAL PAPERS AND LONG-TERM DEBT (a) Short-term bank loans Short-term bank loans are mostly unsecured and represented by short-term notes. (b) Commercial paper Commercial paper, due within one year, is 8,000 million ($79,848 thousand) and 5,000 million as of March 31, 2008 and 2007, respectively, which is unsecured and included in other current liabilities.

51 (c) Long-term debt Long-term debt as of March 31, 2008 and 2007 is as follows: Millions of yen Thousands of U.S. dollars % 20 billion bonds due ,000 $ 199, % 40 billion bonds due ,000 40, , % 100 million bonds due %-3.833% loans from fi nancial institutions due 2008 to , ,074 2,475,247 Total 308, ,174 3,075,107 Less: amount due within one year (113,916) (63,660) 1,136, , ,513 $1,938,108 The annual maturities of long-term debt outstanding as of March 31, 2008 are as follows: 48 Years ending March 31 Millions of yen Thousands of U.S. dollars ,372 $392, , , ,349 93, , , and thereafter 11, ,539 (d) Pledged assets A summary of assets pledged as collateral for long-term and short-term bank loans and for other purposes as of March 31, 2008 is as follows: Millions of yen Thousands of U.S. dollars Property and equipment 10,256 $102,365 Time deposits 195 1,947 Trade receivables 906 9,047 Investment in securities 1,237 12, RETIREMENT BENEFITS OBLIGATION AND PENSION PLAN Retirement benefits obligation as of March 31, 2008 and 2007 consists of the following: Millions of yen Thousands of U.S. dollars Projected benefi ts obligation (153,331) (178,043) $(1,530,411) Plan assets at fair market value 64,014 85, ,932 Unrecognized actuarial net loss 38,970 9, ,963 Unrecognized prior service cost (3,306) (4,625) (33,006) Retirement benefi ts obligation at end of year (53,653) (86,813) $ (535,522)

52 Pension expense for the years ended March 31, 2008 and 2007 included the following components: Millions of yen Thousands of U.S. dollars Service cost 7,722 8,711 $ 77,075 Interest cost on projected benefi ts obligation 4,121 4,545 41,139 Expected return on plan assets (831) (706) (8,297) Amortization of unrecognized actuarial net loss 1,553 1,254 15,505 Prior service cost recognized (548) (601) (5,476) Net periodic pension cost 12,017 13, ,945 Proceeds from shift to DC pension plan (7,858) (78,439) Contribution for defi ned contribution pension plans 5, ,331 Total 9,602 13,846 $ 95,838 Impact on the shifting from a lump-sum payment retirement plan to Defined Contribution pension plan are as follows: Millions of yen Thousands of U.S. dollars Decrease in retirement benefi t obligation 26,261 $262,111 Unrecognized actuarial gain/loss (3,082) (30,761) Unrecognized prior service cost 765 7,635 Decrease in reserves for retirement benefits 23,944 $238, Actuarial assumptions used to determine costs and obligations for retirement benefits are as follows: Millions of yen Discount rate mainly 2.5% mainly 2.5% Expected rate of return on plan assets mainly 2.5% mainly 2.5% Recognition period of prior service cost 15 years 15 years Amortization period of actuarial net loss (gain) years years The total liability in connection with the retirement benefits to directors and statutory auditors, which is included in Retirement benefits obligation, is 539 million ($5,384 thousand) and 528 million as of March 31, 2008 and 2007, respectively. 06 TREASURY STOCK The Company held 19,383 thousand shares of treasury stock as of March 31, 2008 based on approval by the annual shareholders meeting.

53 07 LEASES (1) Finance lease transactions, except for those which meet the conditions that the ownership of the lease assets is substantially transferred to the lessee As a lessee (a) Amounts equivalent to acquisition costs, accumulated depreciation and net balance as of March 31, 2008 and 2007, concerning the finance lease assets are as follows: Acquisition cost Millions of yen Thousands of U.S. dollars Accumulated depreciation Net lease property Acquisition cost Accumulated depreciation Net lease property Acquisition cost Accumulated depreciation Net lease property Vehicles 2,200 1,134 1,066 1, $21,961 $11,319 $10,642 Machinery and tools 1, ,488 1, ,463 9,031 5,431 Other , Total 3,786 2,100 1,686 4,511 2,656 1,854 $37,796 $20,963 $16,832 (b) Future payment obligations of finance lease as of March 31, 2008 and 2007, are as follows: 50 Millions of yen Thousands of U.S. dollars Portion due within one year $ 6,186 Thereafter 1,066 1,033 10,646 Total 1,686 1,854 $16,832 (c) Lease expenses paid and amounts equivalent to depreciation expenses during fiscal 2008 and 2007, are as follows: Millions of yen Thousands of U.S. dollars Lease expenses paid $ 6,678 (Depreciation expenses) (669) (897) (6,678) Amounts equivalent to depreciation expenses are calculated by the straight-line method over the period of the finance leases. Amounts equivalent to interest expenses are not recognized due to immateriality. As a lessor (a) Amounts equivalent to acquisition costs, accumulated depreciation, and net balance as of March 31, 2008 and 2007, concerning the finance lease assets are as follows: Acquisition cost Millions of yen Thousands of U.S. dollars Accumulated depreciation Net lease property Acquisition cost Accumulated depreciation Net lease property Acquisition cost Accumulated depreciation Net lease property Vehicles 40,634 25,618 15,015 39,345 24,026 15,318 $ 405,571 $ 255,698 $149,872 Machinery and tools 112,820 64,419 48, ,408 59,059 43,349 1,126, , ,094 Other 25,432 12,210 13,222 20,301 10,618 9, , , ,970 Total 178, ,248 76, ,056 93,704 68,352 $1,785,481 $1,020,542 $764,938

54 (b) Receivables from finance lease as of March 31, 2008 and 2007, are as follows: Millions of yen Thousands of U.S. dollars Portion due within one year 26,420 23,560 $263,703 Thereafter 57,670 48, ,612 Total 84,091 72,557 $839,316 (c) Lease income received, depreciation expenses and amounts equivalent to interest income during fiscal 2008 and 2007, are as follows: Millions of yen Thousands of U.S. dollars Lease income received 29,849 27,337 $297,927 Depreciation expenses 26,115 23, ,654 Interest income 2,763 2,591 27,586 Amounts equivalent to interest income are calculated by the interest method based on an excess of the aggregate sum of lease income over amounts equivalent to acquisition costs. (2) Future payment obligations of operating lease expenses as of March 31, 2008 and 2007, are as follows: As a lessee 51 Millions of yen Thousands of U.S. dollars Portion due within one year 11,168 8,411 $111,474 Thereafter 77,889 57, ,420 Total 89,058 66,303 $888, INCOME TAXES Income taxes applicable to the Company and consolidated subsidiaries comprise (1) corporation tax, (2) enterprise tax, and (3) inhabitant tax. While the normal statutory tax rates were approximately 40.7 percent both in 2008 and 2007, these income taxes resulted in effective tax rates of approximately 41.4 percent and 42.6 percent in 2008 and 2007, respectively. The following table reconciles the above statutory tax rate to the Company s effective tax rate for the years ended March 31, 2008 and Statutory rate 40.7% 40.7% Non-deductible items Non-taxable items (1.4) (1.3) Impairment loss Inhabitants minimum taxes Tax credit Other, net (2.0) (1.6) Effective tax rate 41.4% 42.6%

55 The significant components of the Company s deferred tax assets and liabilities as of March 31, 2008 and 2007 are as follows: Millions of yen Thousands of U.S. dollars Deferred tax assets: Current: Allowance for doubtful accounts $ 2,686 Accrued expenses 8,429 8,576 84,134 Enterprise tax payable ,910 Lease transaction 3,898 3,670 38,910 Other 4,720 2,516 47,115 Total deferred tax assets - current 18,110 16, , Non-current: Allowance for doubtful accounts ,421 Retirement benefi ts 48,264 61, ,734 Unrealized gain 1,985 1,959 19,820 Impairment loss 5,587 5,588 55,766 Other 10,286 6, ,666 Valuation allowance (7,749) (7,140) (77,343) Total deferred tax assets - non-current 58,918 68, ,065 Total deferred tax assets 77,028 84,472 $768,824 Millions of yen Thousands of U.S. dollars Deferred tax liabilities: Current: Accumulated depreciation $ 8,093 Other ,483 Total deferred tax liabilities - current 959 1,158 9,576 Non-current: Accumulated depreciation 18,995 17, ,592 Gain on securities contribution to employee s retirement benefits trust 20,653 20, ,146 Unrealized gain on securities 34,568 51, ,032 Other 3,592 3,218 35,859 Total deferred tax liabilities - non-current 77,810 93, ,630 Total deferred tax liabilities 78,770 94,211 $ 786,207 Total net deferred tax assets: Current 17,091 14,920 $ 170,595 Total net deferred tax liabilities: Non-current (18,833) (24,658) (187,978) Total (1,741) (9,738) $ (17,383)

56 09 SEGMENT INFORMATION (a) Industry segment information Operations of the Company and its consolidated subsidiaries have been classified into three industry segments: distribution and transportation, goods sales and other. The distribution and transportation segment includes railway forwarding, motor transport, marine and harbor transportation, air freight and travel, warehousing, heavy haulage and construction, in-factory work and other transport operations. The goods sales segment includes the sale of vehicles, supplies for transportation, petroleum, LP gas, etc., as well as lease and maintenance operations. The other segment includes mediation, planning and design, and management of real estate and a driving school. Summarized financial information by industry segment for the years ended and as of March 31, 2008 and 2007 is as follows: Millions of yen Distribution & transportation Goods sales Other Subtotal Adjustment & eliminations Total 2008: Revenues 1,600, ,964 28,629 2,007,582 (106,148) 1,901,433 Operating income 43,896 5,752 1,061 50,710 (2,208) 48,502 Identifi able assets 1,063, ,274 30,304 1,339,606 (42,200) 1,297,406 Depreciation & amortization 40,116 44, ,352 (394) 84,957 Capital expenditure 55,737 54,866 1, ,680 (106) 111, Millions of yen Distribution & transportation Goods sales Other Subtotal Adjustment & eliminations Total 2007: Revenues 1,584, ,578 20,115 1,970,171 (103,904) 1,866,267 Operating income 45,940 5,351 1,275 52,567 (2,242) 50,325 Identifi able assets 1,129, ,601 17,516 1,390,632 (29,938) 1,360,694 Depreciation & amortization 34,928 45, ,442 (387) 80,054 Capital expenditure 52,719 52,144 1, ,006 (82) 105,923 Thousands of U.S. dollars Distribution & transportation Goods sales Other Subtotal Adjustment & eliminations Total 2008: Revenues $15,979,520 $3,772,477 $285,752 $20,037,750 $(1,059,469) $18,978,280 Operating income 438,134 57,414 10, ,144 (22,043) 484,100 Identifi able assets 10,610,119 2,458, ,472 13,370,662 (421,200) 12,949,462 Depreciation & amortization 400, ,376 5, ,902 (3,934) 847,968 Capital expenditure 556, ,625 10,736 1,114,683 (1,060) 1,113,622 (b) Foreign operations Summarized financial information on foreign operations for the years ended 2008 and 2007 is as follows: Millions of yen Thousands of U.S. dollars Revenue from foreign operations 402, ,948 $4,019,290 Ratio to total revenue 21.2% 21.0% 21.2%

57 10 CONTINGENT LIABILITIES As of March 31, 2008, the Company and its consolidated subsidiaries were contingently liable as follows: Millions of yen Thousands of U.S. dollars Notes discounted with banks 62 $ 620 Guarantees of loans, principally of unconsolidated subsidiaries and affi liates 1,889 18, SUBSEQUENT EVENT (1) Basic agreement for combination of small-package delivery business with JP Post Based on the basic agreement with JP Post on May 5, 2007, the basic agreement of combination with JP Post was signed on April 25, Then, Nippon Express established a new company for combination of small-package delivery business on June 1, Overview of the new company is as follows: Name: JP Express Co., Ltd. Location: 1-3-2, Kasumigaseki, Chiyoda-ku, Tokyo (JP Post Building) Paid-in capital: 300 million 2. Combination of target businesses (JP Post delivery business and Pelican delivery business) to be merged to create a new company. Currently an examination is being conducted concerning the details of the business combination and its impact on business performance which, at this stage, is still unclear. (2) Investigation by the Japan Fair Trade Commission Nippon Express was investigated by the Japan Fair Trade Commission on April 20, 2008, for violation of the Antimonopoly Act, regarding the fuel surcharge added to freight charges for international air cargo transportation. It is difficult to forecast the impact this will have on our financial results at the moment since the investigation by the Commission is currently underway.

58 REPORT OF INDEPENDENT AUDITORS 55

59 GLOBAL NETWORK Subsidiaries and Major Representative Offi ce THE AMERICAS 56 NIPPON EXPRESS U.S.A., INC. 590 Madison Avenue, 24th Floor, New York, NY 10022, U.S.A. NIPPON EXPRESS TRAVEL U.S.A., INC. 720 Market Street, 6th Floor, San Francisco, CA 94102, U.S.A. NEX TRANSPORT, INC State Route 287, East Liberty, OH 43319, U.S.A. NIPPON EXPRESS CANADA, LTD Edwards Boulevard, Mississauga, Ontario L5T 2X3, Canada NIPPON EXPRESS DE MEXICO, S.A. DE C.V. Avenida Michoacan No. 20, Nave #9 C Colonia Renovacion, C.P Mexico, D.F., Mexico NIPPON EXPRESS USA DE TIJUANA, S.A. DE C.V. Blvd. Bellas Artes #20240 B y C, Ciudad Industrial, Delegación Mesa de Otay, Tijuana, Baja California, 22444, Mexico NIPPON EXPRESS DO BRASIL Rua Fortaleza 53, Bela Vista, São Paulo, SP CEP , Brazil NITTSU DO BRASIL COMERCIAL, LTDA. Rua Fortaleza 53, Bela Vista São Paulo, SP, CEP , Brazil NIPPON EXPRESS CHILE S.A. Lo Echevers 891, Modulo A-13 Mercocentro Lo Echevers, Quilicura, Santiago, Chile

60 EUROPE 57 NIPPON EXPRESS (IRELAND) LTD. Unit 1, Northern Cross Business Park, North Road, Dublin 11, Ireland NIPPON EXPRESS (U.K.) LTD. Heathrow Millington Road, Hayes, Middlesex UB3 4AZ, U.K. NIPPON EXPRESS FRANCE, S.A. 1 Rue Du Chapelier, B.P , Roissy Aeroport Charles De Gaulle, France NIPPON EXPRESS (BELGIUM) N.V./S.A. Brucargo Bldg. 723, 1931 Zaventem, Belgium NIPPON EXPRESS (NEDERLAND) B.V. Cessnalaan 24, 1119 NL Schiphol-Rijk, The Netherlands NIPPON EXPRESS EURO CARGO B.V. Cessnalaan 24, 1119 Nl Schiphol-Rijk, The Netherlands NIPPON EXPRESS TOURS (NEDERLAND) B.V. Cessnalaan 24, 1119 NL Schiphol-Rijk, The Netherlands NIPPON EXPRESS (DEUTSCHLAND) GMBH Marie-Bernays-Ring 23, Möenchengladbach, F.R.GERMANY NIPPON EXPRESS (SCHWEIZ) AG Grindel Strasse 19, 8303 Bassersdorf, Switzerland NIPPON EXPRESS (ITALIA) S.R.L. Via Londra 12, Segrate (Mi), Italy NIPPON EXPRESS DE ESPAÑA, S.A. Centro de Carga Aerea, Aeropuerto de Barajas, Parcela 2.1, Nave 2, Madrid, Spain NIPPON EXPRESS PORTUGAL S.A. Aeroporto De Lisboa, Edifi cio 125, Piso 3, Gab 6, 1700 Lisbon, Portugal NIPPON EXPRESS (RUSSIA) LIMITED LIABILITY COMPANY Gapsalskaya street 5, lit. A, St. Petersburg, , Russia NIPPON EXPRESS (MIDDLE EAST) L.L.C. Lob21, Room No. 31, P.O. Box 17341, Jebel Ali, Dubai, United Arab Emirates

61 GLOBAL NETWORK Subsidiaries and Major Representative Offi ce ASIA & OCEANIA 58 NIPPON EXPRESS (H.K.) CO., LTD Chinachem Golden Plaza, 77 Mody Road, Tsim Sha Tsui East, Kowloon, Hong Kong NIPPON EXPRESS (SHENZHEN) CO., LTD. B Futian Free Trade Zone, Shenzhen, The People s Republic of China NIPPON EXPRESS (ZHUHAI F.T.Z.) CO., LTD. No , Zhuhai Free Trade Zone, Hong Wan, Zhuhai, Guang Dong, The People s Republic of China NIPPON EXPRESS (CHINA) CO., LTD. Room 301, Bja Building, Tianzhu Airport Industrial Zone, 10 Tianzhu Road, Shunyi District, Beijing, , The People s Republic of China NIPPON EXPRESS (ZHUHAI) CO., LTD. No. 1 Ping Dong 5 Road, Nan Pin High-Technology Industry Area, Zhuhai, Guang Dong, The People s Republic of China NIPPON EXPRESS (JIAXING) CO., LTD. Rm 415, BoYuang Bldg, No. 6 Dong Fang Rd, ZhaPu Development Zone, JiaXing, ZheJiang, , The People s Republic of China NITTSU SINOTRANS LOGISTIC DALIAN LTD. No. 6 Haitian Rd, Free Trade Zone Of Dalian, Dalian, , The People s Republic of China NIPPON EXPRESS CARGO SERVICE (SHENZHEN) CO., LTD. 2F, West Side, Nippon Express Warehouse Yantain Port Free Trade Zone Shenzhen, The People s Republic of China NIPPON EXPRESS (SHANGHAI) CO., LTD. 11F, Jinan Tower No. 908 East Daming Road, Shanghai, , The People s Republic of China NIPPON EXPRESS GLOBAL LOGISTICS (SHANGHAI) CO., LTD. 11, De Bao Lu, Wai Gao Qiao Free Trade Zone, Shanghai, The People s Republic of China NIPPON EXPRESS (SUZHOU) CO., LTD. No. 622 Changjiang Rd, Suzhou New District, Suzhou Jiangsu Province, , The People s Republic of China SHANGHAI e-technology CO., LTD. 6F, UC-Tower, 500 Fushan Road, Pudong New Area, Shanghai, , The People s Republic of China

62 NIPPON EXPRESS (XIAMEN) CO., LTD. No. 23-1B, Xiangxing 1 Road, Xiangyu Free Trade Zone Xiamen, , The People s Republic of China NIPPON EXPRESS (SINGAPORE) PTE. LTD. 40 ALPS Avenue, Singapore NIPPON EXPRESS (MALAYSIA) SDN, BHD. 10th Floor, West Tower, Wisma Consplant 1, No. 2 Jalan Ss16/4, Subang Jaya, Selangor Darul Ehsan, Malaysia NITTSU TRANSPORT SERVICE (M) SDN, BHD. Lot 4286, Batu 12, Jalan Balakong, Sri Kembangan, Selangor Darul Ehsan, Malaysia NIPPON EXPRESS (AUSTRALIA) PTY., LTD. Unit 1, 154 O riordan Street, Mascot, N.S.W. 2020, Australia NIPPON EXPRESS (NEW ZEALAND) LTD. 37 Andrew Baxter Drive, Airport Oaks, Mangere, New Zealand NIPPON EXPRESS (TAIWAN) CO., LTD. 5Fl., No. 100, Section 3, Minsheng E. Rd., Songshan District, Taipei City 105, Taiwan, R.O.C. NIPPON EXPRESS (THAILAND) CO., LTD. 3195/16 11th Floor, Vibulthani Tower 1, Rama 4 Road, Klong Ton, Klong Toey Bangkok, 10110, Thailand HI-TECH NITTSU (THAILAND) CO., LTD. Lake Rajada Offi ce Complex,193/88, 21st Fl., Rachadapisek Road, Klong-Toey, Bangkok, 10110, Thailand NIPPON EXPRESS ENGINEERING (THAILAND) CO., LTD. 3195/16 11th Floor Vibulthani Tower 1, Rama 4 Road, Klong Ton, Klong Toey, Bangkok, 10110, Thailand NIPPON EXPRESS (PHILIPPINES) CORPORATION Unit 20B Trafalgar Plaza, 105 H.V. Dela Costa St., Salcedo Village, Makati City, 1227, Philippines NEP DISTRIBUTORS SYSTEM, INC Unit 3 Elisco Warehouse #74, Elisco Road, Kalawaan Pasig City, Philippines P.T.NITTSU LEMO INDONESIA LOGISTIK Jl. Raya Cakung Cilincing Kav. 14, Cakung-Timur, Cakung, Jakarta, 13910, Indonesia PT.NIPPON EXPRESS INDONESIA Soewarna Business Park Block J lot 12 Bandara International Soekarno-Hatta Jakarta, 19110, Indonesia NEX GLOBAL LOGISTICS KOREA CO., LTD. 11F Kyobo Securities B/D 26-4 Yeouido-Dong Yeoungdeungpo-Gu, Seoul, , Republic of Korea NIPPON EXPRESS (VIETNAM) CO., LTD. Room 5.3 E-TOWN, 364 Cong Hoa Street, Tan Binh District, Ho Chi Minh City, Socialist Republic of Vietnam 59 Nippon Express (INDIA) PTE., LTD. Logistics Park, Plot No. 7, Road No. 10, Export Promotion Indl. Park, Whitefi eld. Bangalore , India NEP LOGISTICS, INC Unit 1 Lot 10 Phase 4, East Science Ave. Laguna Technopark, Inc. Binan, Laguna, Philippines MAJOR REPRESENTATIVE OFFICES Moscow Representative Office Millennium House, Offi ce H (5F) Trubnaya str.12, Moscow, , Russia Johannesburg Representative Office 11 Pomona Road, Cnr. Hawthone Road, Kempton Park 1619, South Africa Seoul Representative Office C/O The Korea Express Co., Ltd , Seosomun-Dong, Chung-Ku Seoul, , Republic of Korea Pusan Representative Office Korea Express Bldg., Room No. 909, , Choryang-Dong, Dong-Ku, Pusan, , Republic of Korea New Delhi Representative Office C/O Jayem Impex Private Limited. Plot No. 422, Phase- III, Udyog Vihar Gurgaon Haryana, , India

63 COMPANY INFORMATION (As of March 31, 2008) Name Nippon Express Co., Ltd. Headquarters 1-9-3, Higashi Shimbashi, Minato-ku, Tokyo , Japan Tel: +81 (3) Formal establishment October 1, 1937 Paid-in capital 70,175 million Employees 38,517 URL 60 Areas of operations 1. Railway utilization transportation business 2. Motor cargo transportation business 3. Motor vehicle utilization transportation business 4. Marine transportation business 5. Coastal shipping business 6. Harbor transportation business 7. Vessel utilization transportation business 8. Air freight forwarding business 9. Cargo transportation business and freight utilization business other than those mentioned in the foregoing items 10. Cargo transportation agency business 11. Warehousing business 12. Construction business 13. Customs brokerage business 14. Express clearing business 15. Air transportation agency business 16. Damage insurance agency business 17. Packing and packaging business 18. Packing, display and storage of drugs, quasi-drugs, cosmetics and medical equipment 19. Travel business 20. Transportation, erection and installation of heavy cargo and business activities incidental thereto 21. Sales and purchases, leasing and letting of immovables and business activities incidental thereto 22. Guarding business 23. Employee dispatching business 24. Industrial waste disposal service 25. Special correspondence delivery service 26. Collection and disposition of physical distribution information and incidental business thereto 27. Business incidental to all items mentioned above 28. Investments in and loans for all items mentioned above

64 SHARE INFORMATION (As of March 31, 2008) Stock listing Number of shares Number of shareholders Stock transfer agent Tokyo, Osaka Total number of shares issued: 3,988,000,000 Total number of shares outstanding: 1,062,299,281 86,672 Mitsubishi UFJ Trust and Banking Corporation Distribution of Shares By type of shareholders By size of shareholding 86,672 shareholders Individuals, others 97.7% Other corporate 1.5% Overseas corporate 0.5% Financial institutions 0.2% Securities companies 0.1% 1,062,299,281 shares Financial institutions 44.6% Individuals, others 19.8% Overseas corporate 26.4% Other corporate 6.4% Securities companies 0.9% Treasury stock 1.8% Major shareholders Number of shares held (Thousands of shares) Voting share percentage (%) Asahi Mutual Life Insurance Company 65, The Master Trust Bank of Japan, Ltd. (Account in Trust) 53, Mizuho Bank, Ltd. 51, Nipponkoa Insurance Co., Ltd. 50, Japan Trustee Services Bank, Ltd. (Account in Trust) 47, Mizuho Corporate Bank, Ltd. 41, Japan Trustee Services Bank, Ltd. (Account in Trust No. 4) 28, Nippon Express Employees Shareholding Association 23, JPMorgan Chase Bank , The Bank of Tokyo-Mitsubishi UFJ, Ltd. 20, Stock price movement (Yen) 1, (Thousands of shares) 150, ,000 90, ,000 30,

65 1-9-3, Higashi-Shimbashi, Minato-ku, Tokyo , Japan Phone: +81 (3) URL: Printed in Japan